The monetary policy of RBI has failed to walk its talk

Synopsis: A disconnect between the commentary and policy action of RBI’s repo rate-setting panel could cost us dear in time to come. Introduction According to RBI Governor, the Indian Economy is recovering from the impact of Covid. But still, there is a need to work on inflation, so that it will remain within the targets defined.… Continue reading The monetary policy of RBI has failed to walk its talk

A flawed calculation of inflation

Synopsis: The current official inflation rate does not correctly measure price rise and it needs modification. Introduction Inflation for the last four months has been worryingly high. Wholesale price index (WPI) has been above 10% and consumer price index (CPI) crossed the 6% mark. Does the official data capture the real picture? Data issues: Unlock… Continue reading A flawed calculation of inflation

Transient easing: On inflation

Synopsis: Cutting fuel taxes is a sure-shot way to address a major component of price pressures. Introduction The latest retail inflation data suggest, that price pressures have begun to moderate in the economy, with CPI showing inflation having slowed for a second month to 5.3%, after July’s 5.59%. However, price trends among the constituents of… Continue reading Transient easing: On inflation

Let central banks stay focused on their goals

Synopsis: Urjit Patel has suggested adding climate aims to the monetary agenda, however it has multiple risks associated to it. Hence, other tools should be used for our carbon crisis. Introduction Recently, former Reserve Bank of India (RBI) governor Urjit Patel laid out a strong argument in favour of the proposition of adding climate goals… Continue reading Let central banks stay focused on their goals

If inflation remains elevated, Monetary Policy Committee could lose credibility. This must be avoided

What is the news? RBI Governor has expressed optimism over the state of the economy. Speaking at an event organized by The Indian Express and the Financial Times, he noted that the economy will witness a sequential improvement in the second quarter of this year. What does the recent GDP data indicate? Recently released GDP… Continue reading If inflation remains elevated, Monetary Policy Committee could lose credibility. This must be avoided

No taper tantrum (On US Fed reserve policies)

Source: Business Standard What is the news? The US Fed Reserve is considering reducing the pace of its asset purchase. As per Fed’s Chairman, the economy had evolved as expected, and it could be appropriate to start reducing asset purchase this year. But, it’s not clear at this stage as to when the Fed will… Continue reading No taper tantrum (On US Fed reserve policies)

RBI announces Open Market Purchase under G-sec Acquisition Programme 2.0

Source: The Hindu What is the News? Reserve Bank of India(RBI) has announced that it will conduct an open market purchase of government securities worth Rs 25,000 crore under the G-sec Acquisition Programme (G-SAP 2.0). About G-Sec Acquisition Programme(G-SAP): G-Sec Acquisition Programme(G-SAP) is basically an unconditional and a structured open market operation (OMO), of a… Continue reading RBI announces Open Market Purchase under G-sec Acquisition Programme 2.0

Why RBI disagrees with market perception on policy normalization?

Source: Business Standard What is the news? RBI’s decision to conduct variable reverse repo (VRRR) auctions should not be considered as a reversal of the accommodative policy stance. Background Recently, RBI while announcing the review of the monetary policy, said the central bank has decided to conduct fortnightly VRRR auctions. However, RBI Governor categorically stated that… Continue reading Why RBI disagrees with market perception on policy normalization?

Spreading disinflation over 2-3 years to reduce output loss, says RBI

Source: Business Standard Relevance: Addressing various issues ailing the financial sector of the Indian economy. Synopsis: RBI Governor Shaktikanta Das, other deputy governors took questions from the media and addressed the raging topics in the financial sector. Here is what he had to say regarding RBI’s view on various issues. On inflation Between 2016 and… Continue reading Spreading disinflation over 2-3 years to reduce output loss, says RBI