The Reserve Bank of India (RBI) is in inflation pointing central bank. Legally, RBI needs to check on inflation. The central bank expects the economy to increase by 7.5%, less than the IMF estimate of 9%. Economic growth has suffered a lot and will suffer more because of the nascent recovery hit by the COVID-19 wave, both at the international levels. The expenditure that the government is making is not high enough to provide a massive boost to the economy.
Private consumption, which holds the key to growth, also went below the pre-pandemic levels and showed no sign of improving.
RBI is hopeful the government-invested capital will make a massive difference in the coming time. The previous experience does not support this hope or expectation. The central bank believes that the retail price will rise according to its expectations, but it may be underestimating the problem.
It expects vegetable and food prices to come down in the upcoming period and hopes for a normal monsoon, but other factors are also available, which can add to the price level as global commodity prices are instantly increasing. Crude prices are increased in the past few months. Retail fuel prices will undoubtedly increase a few times after the current round of assembly elections.
That has an impact on general price levels. The central bank has its policy in most countries for normalisation measures by tightening rates. The RBI’s primary need to be control inflation, but they are not paying attention to it. RBI has its agenda. It wants to defend the credentials of the government trying to control yield; otherwise, the government will all claims for the economy to be revived.
Government is confident that the green economy in which car sales are expected to be the lowest because people are not satisfied with the phase-out even though they are unhappy because of increased fuel prices. Without development, inflation remained high forever, but markets lost the real economy for outperforming. Investment is not that safe for middle-class people.