In the midst of controversies and criticism, the Reserve Bank of India (RBI) Governor Raghuram Rajan retains key rate. This is amid inflation concern also. A normal monsoon coupled with astute food management can counter the rise in prices but hardening of global crude prices remain a worry for the Central Bank, which has lowered the benchmark interest rate by 150 basis points since January 2015 to boost country’s economic growth. Given the uncertainities RBI will stay on hold, but the stance of monetary policy remains accomodative. Inflation is driven mainly food prices and if the prices of commodities come down considerably then we can see light at the end of the tunnel. A sharper than anticipated upsurge in inflationary pressures emanating from a number of food items, as well as reversal in commodity prices all add woes to the earlier situation.
(The views expressed by the author in the article are his/her own.)