RBI FLAGS RISKS OF HIGHER INFLATION


 

 

·         The risks of inflation during the remaining part of the current financial year,  could emanate from rising commodity prices, especially crude oil, global financial market developments and second-round impact from revision of house rent allowance for central government staff.

·         Headline inflation which averaged 4.8% during Q1:2018-19, is likely to face upside risks over the rest of the year from a number of sources.

·         Inflation concerns have led RBI to raise the key policy rate, or the repo rate, twice in the last two monetary policy meetings by 25 basis points each, to 6.5%.

·         RBI has projected headline inflation at 4.6% in Q2 of 2018-19; 4.8% in the second half of the year; and 5% for the first quarter of 2019-20, taking into account the HRA impact for the central government.

·         On growth, RBI said incoming data pointed to favourable conditions for an acceleration of activity in the Indian economy.

·         RBI said the Indian economy is set to step up its growth trajectory, adding that two aspects warrant priority if this aspiration is to be ‘realisable and sustainable.’

·         The first is infrastructure that holds the key to unleashing faster growth.

·         Second, even as infrastructure development provides the thrust, sustaining the momentum of growth will hinge around its inclusiveness and its employment intensity.

·         The pace and quality of growth will be anchored by progress on structural reforms over the medium-term which include resolution of banking and corporate financial stress, taxation, agriculture, liberalisation of the economy’s external interface and galvanising the business environment.

 

Source : The Hindu

 

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