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Challenges in controlling inflation UPSC NOTE


  • The RBI’s Monetary Policy Committee (MPC) has for an eighth consecutive meeting chosen to leave the benchmark repo rate unchanged at 6.50% on concern that ‘elevated food inflation could derail’ its efforts to ensure durable price stability.

  • Food inflation as measured by the Consumer Food Price Index accelerated to a provisional 8.7% in April, from March’s 8.52%, and recent indicators such as Crisil’s food plate costs suggest that price gains spurred by a surge in tomato, onion and potato prices may have quickened even further in May

  • The Centre for Monitoring Indian Economy (CMIE) forecast on June 8, that headline retail inflation likely increased by 31 basis points last month to 5.14%, driven almost entirely by a 40 basis points acceleration in food price gains to 9.1%. 

  • The MPC, which voted by a 4-2 majority to “remain focussed on withdrawal of accommodation to ensure that inflation progressively aligns to the target” of 4%, flagged the challenges it faces in achieving this goal as increasing adverse climate events trigger supply shocks that make it very hard to foresee the food price trajectory. 

  • The CMIE cited last month’s heatwaves as the cause for the rise in the costs of fruits and vegetables.

  • The MPC is also only too aware that besides the threat from escalating food costs, which remain vulnerable to the precariously low water storage levels at the country’s reservoirs as well as the ongoing exceptionally hot summer temperatures, rising prices of industrial metals could undermine the deflationary trend in core inflation

  • Add to the mix the uncertain outlook for crude oil prices given the tensions in West Asia and the output cuts being implemented by the OPEC+ producer nations, and it is a recipe for heightened uncertainty on the inflation path. 

  • The RBI’s latest round of surveys underline precisely why price stability is the central concern for policymakers

  • RBI Governor Shaktikanta Das is absolutely justified in maintaining an unwavering focus on anchoring inflation expectations, given that it is, as he put it, “the required foundation for sustained” long-term growth



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Challenges in controlling inflation UPSC NOTE
Challenges in controlling inflation UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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