India's Macroeconomic Outlook: A 'Goldilocks' Scenario of High Growth and Low Inflation?
UPSC Relevance
Prelims: Indian Economy (Inflation - CPI, Growth - GDP, Monetary Policy - RBI/MPC, Fiscal Policy - GST).
Mains:
General Studies Paper 3 (Economy): Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Inflation and its management. The interplay between growth, inflation, and policy responses is a core theme for GS3.
Key Highlights from the News
India's macroeconomic outlook is currently very favorable. Compared to last year, the country has moved to a situation of high growth and low inflation.
Retail inflation in August is only 2.1%. This is within the Reserve Bank of India's (RBI) comfort band of 2-6%.
Food inflation is very low. A significant drop in the prices of vegetables and pulses is a major reason for this.
High GDP growth (7.8%) in the first quarter strengthens this optimism.
The growth-inflation differential has increased to 5.5%, indicating the health of the economy.
The new GST rate reduction, which comes into effect on September 22, is expected to help further reduce inflation.
Due to these favorable conditions, the article suggests that RBI is likely to make interest rate cuts by December.
COMMENTS