oppn parties Inflation Targeting Must Not Be At The Cost Of Growth

News Snippets

  • For the first time ever, Mukesh Ambani buys a 29% stake in Gautam Adani's Mahan Energen, a subsidiary of Adani Power to source 500MW of electricity from the company's power plant in MP
  • Stocks continue to rise on Thursday - Sensex gains 639 points to 73635 and Nifty 203 points to 22326
  • Golf - Indian Open: 3 Indians at tied 14th as Joost Luiten takes the lead with a wonderful 7-under 65
  • IPL: RR beat DC by 12 runs as Riyan Parag (84 off just 45 balls) shines
  • SP drops two candidates owing allegiance to Azam Khan from Rampur and Moradabad
  • In Assam, a controversy erupted after a picture of UPPL leader Benjamin Basumatary, lying on a stack of Rs 500 notes circulated on social media. UPPL is an ally of the BJP
  • AAP's Jalandhar-West MP Sushil Kumar Rinku joins the BJP. He was the only AAP Lok Sabha MP
  • Supreme Court dismisses Centre's plea to review its 2023 verdict in the PMLA case
  • Close save for passengers as they remain unhurt after the wings of two planes graze at Kolkata airport. Pilots derostered and inquiry ordered by DGCA
  • Bengal BJP leader Dilip Ghosh gets notice from the EC as well as the BJP for making ugly remarks about Mamata Banerjee's parentage
  • Sadanand Vasanth Date, who faught terrorists in the 26/11 attack and was awarded the Preisent's Police medal, has been appointed the head of the NIA
  • Centre will borrow Rs 7.5L cr in the first six months of FY25, nearly 50% of the target for the full year
  • 25 stocks, including SBI, will see same day trade settlements from today in the world's fastest settlement mode in both BSE and NSE
  • Stocks recover smartly on Wednesday: Sensex rises 526 points to 72996 and Nifty 118 points to 22123
  • Tennis: Rohan Bopanna-Matthew Ebden reached the semifinals of the Miami Open
Delhi Lt Governor Vinai Kumar Saxena says government cannot be run from jail, hints at President's Rule in the capital ////// In a dangerous incident, the wings of two planes grazed while taxiing on the runway at Kolkata airport, all passengers were safe but DGCA ordered an inquiry and the pilots were derostered
oppn parties
Inflation Targeting Must Not Be At The Cost Of Growth

By Our Editorial Team
First publised on 2022-07-14 14:52:33

About the Author

Sunil Garodia The India Commentary view

Although commodity prices have started declining from the highs they had attained after the war started in Ukraine, inflation has remained elevated worldwide. The June figures showed the Consumer Price Index (CPI) was 7.01% percent in India. In the US, inflation was at 9.1% (annualized), the highest in 40 years. As the US Fed has already indicated that it will target inflation by continuously hiking policy rates until it is tamed, the FIIs are going to withdraw investments from India, putting more pressure on the rupee. If dollars become costlier, India's import bill will balloon further and that will add to inflationary pressures. This is a situation that will also lead the MPC of the RBI to hike policy rates and adopt a tight money policy by squeezing out liquidity from the market. Needless to say both these actions, although necessary to fight inflation, will ensure that there is less money to borrow and even that will come at a higher cost. In short, it will puncture growth in the short to medium term.

Normally, cost-push inflation, which is what India and the rest of the world is experiencing now, cannot be fought only by changes in monetary policy. The Centre also pitched in by making adjustments in the import and export policies of some items to cool prices in the domestic market. But the RBI was criticized for falling behind the curve and it is now making it up by pushing through rate hikes in successive MPC meetings, the first in an off-cycle action. But it has to keep in mind that consumer demand is not rising and remains subdued. Hence, growth will be stymied if rates are hiked beyond a certain level. On the other hand, India was performing well on the export front. But with recession predicted in advanced economies, demand for goods and services from such nations will drop, hitting exports too. Hence the RBI has to strike a good balance between fighting inflation and pushing growth.