Team News Riveting
India’s retail inflation, measured via the Consumer Price Index (CPI), dropped to 4.59 per cent in December, landing within the central bank’s target for the first time since the COVID-19 pandemic started.
The nation’s CPI was pegged at 6.93 per cent in November, marginally higher than the inflation targeting band that the central government had directed the Reserve Bank of India (RBI) to keep inflation within – between 2 and 6 per cent. The fall will come as a relief to the RBI.
In recent months, rising rates of inflation had limited the RBI’s ability to engage in monetary policy easing measures aimed to spur an economic revival. At the last Monetary Policy Committee (MPC) meeting in late December, the RBI had opted to continue its accommodative monetary policy posture.
During the initial months of the COVID-19 outbreak, the RBI swiftly slashed interest rates in the hope of stirring economic activity, disregarding any concerns that increased inflationary pressures may follow.
Although the Finance Ministry has recommended that the RBI keep the inflation at roughly 4 per cent, the reality is that it has struggled to do so since November 2019.
The index peaked at a multi-year high of 7.6 per cent in October.
