Fight against inflation will be prolonged, dogged: RBI

NEW DELHI: The Reserve Bank of India (RBI) on Monday in its monthly bulletin for October said the fight against inflation will be ‘dogged and prolonged’. The momentum of real GDP growth is likely to shed the drag embedded in the National Statistical Office (NSO’s) estimates for April-June of 2022-23 and move into positive territory in the remaining quarters, according to the bulletin.  

“The fight against inflation will be dogged and prolonged, given the long and variable lags with which monetary policy operates, and fraught with uncertainties. Yet, if we succeed, we will entrench India’s prospects as one of the fastest-growing economies of the world enjoying a negative inflation differential with the rest of the world,” the bulletin said.  

Retail inflation rose to 7.4 per cent in September, up from 7.0 per cent in August, while headline inflation saw a jump due to growth in CPI-based food inflation to 8.4 per cent in September from 7.6 per cent in the previous month.

Post-Covid, contact-intensive sectors are likely to lead the rejuvenation as the pandemic restrictions no longer exist, it said, further adding that festival-related spending is already boosting consumption demand with positive externalities for other components of domestic demand.

The headline inflation is likely to ease from its September high on account of moderating momentum and favourable base effects.

“Edible oil price pressures are likely to remain contained on improved supply from key producing countries and measures taken by the government. Going forward, there could be some tapering of selling price increases due to easing supply conditions and softening of industrial metal and crude oil prices. With services activity showing strong rebound and some improvement in pricing power, risks of higher pass-through of input costs, however, do remain,” it stated.

As per the bulletin, monetary policy remains focussed on realigning inflation with the target involving two milestones. It needs to first bring it within the tolerance band and second, reduce it to its mid-point.  This will take time due to repeated shocks to which inflation has been subjected by both epidemiological and geopolitical causes.

ALSO READ | WPI inflation eases to 10.7 per cent in September

Household credit-to-GDP ratio at 37.7 per cent in 2020 

India’s household credit-to-GDP ratio is catching up with its emerging peers, an RBI report said on Monday. As per the report, India’s household credit-to-GDP ratio in 2020, at 37.7 per cent, is way below China’s 61.7 per cent but coincided with South Africa from 2017 onwards. Recently, Brazil (36.8 per cent) has converged to India’s level.

The share of personal loans in total credit to households has risen steadily in recent years. Personal loans in household credit increased to 48.1 per cent in March 2021 from 42.3 per cent in March 2019, a 5.7 percentage points increase during the pandemic.

NEW DELHI: The Reserve Bank of India (RBI) on Monday in its monthly bulletin for October said the fight against inflation will be ‘dogged and prolonged’. The momentum of real GDP growth is likely to shed the drag embedded in the National Statistical Office (NSO’s) estimates for April-June of 2022-23 and move into positive territory in the remaining quarters, according to the bulletin.   “The fight against inflation will be dogged and prolonged, given the long and variable lags with which monetary policy operates, and fraught with uncertainties. Yet, if we succeed, we will entrench India’s prospects as one of the fastest-growing economies of the world enjoying a negative inflation differential with the rest of the world,” the bulletin said.   Retail inflation rose to 7.4 per cent in September, up from 7.0 per cent in August, while headline inflation saw a jump due to growth in CPI-based food inflation to 8.4 per cent in September from 7.6 per cent in the previous month. Post-Covid, contact-intensive sectors are likely to lead the rejuvenation as the pandemic restrictions no longer exist, it said, further adding that festival-related spending is already boosting consumption demand with positive externalities for other components of domestic demand. The headline inflation is likely to ease from its September high on account of moderating momentum and favourable base effects. ALSO READ | Inflation and the risks of freebie politics “Edible oil price pressures are likely to remain contained on improved supply from key producing countries and measures taken by the government. Going forward, there could be some tapering of selling price increases due to easing supply conditions and softening of industrial metal and crude oil prices. With services activity showing strong rebound and some improvement in pricing power, risks of higher pass-through of input costs, however, do remain,” it stated. As per the bulletin, monetary policy remains focussed on realigning inflation with the target involving two milestones. It needs to first bring it within the tolerance band and second, reduce it to its mid-point.  This will take time due to repeated shocks to which inflation has been subjected by both epidemiological and geopolitical causes. ALSO READ | WPI inflation eases to 10.7 per cent in September Household credit-to-GDP ratio at 37.7 per cent in 2020  India’s household credit-to-GDP ratio is catching up with its emerging peers, an RBI report said on Monday. As per the report, India’s household credit-to-GDP ratio in 2020, at 37.7 per cent, is way below China’s 61.7 per cent but coincided with South Africa from 2017 onwards. Recently, Brazil (36.8 per cent) has converged to India’s level. The share of personal loans in total credit to households has risen steadily in recent years. Personal loans in household credit increased to 48.1 per cent in March 2021 from 42.3 per cent in March 2019, a 5.7 percentage points increase during the pandemic.