· According to Reserve
Bank of India (RBI) Governor Shaktikanta Das, the disinflation process in India
will be slow and protracted, with the 4%
inflation target likely to be met only over the medium term. “While our
inflation projection for the current financial year 2023-24 is lower, at 5.1%,
it would still be well above the target,” he added.
· The country's monetary policy committee (MPC), headed by
the RBI chief, is tasked with bringing
down inflation to 4% over the medium term and holding it between 2% and 6% over the long term.
· Latest data showed
India's annual retail inflation cooled to 4.25% in May from 4.7% in April, but
analysts expect prices to remain sticky in the coming months.
· Das said regulators
cannot be oblivious to growth concerns given the outsized addition to the
workforce every year because of the 'demographic dividend' in the world's most
populous country.
· RBI, for the second
consecutive monetary policy, left the repo unchanged at 6.5 per cent.The
central bank has raised the repo rate by 250 basis points (bps) between May
2022 and February 2023 to check inflation.
|
What is Disinflation? ·
Disinflation is a temporary slowing of
the pace of price inflation and is used to describe instances when the
inflation rate has reduced marginally over the short term. ·
Unlike inflation and deflation, which
refer to the direction of prices, disinflation refers to the rate of change
in the rate of inflation. ·
Disinflation is not considered
problematic because prices do not actually drop, and disinflation does not
usually signal the onset of a slowing economy. Deflation is represented as a
negative growth rate, such as -1%, while disinflation is shown as a change in
the inflation rate, say, from 3% one year to 2% the next. Disinflation is
considered the opposite of reflation, which occurs when a government
stimulates an economy by increasing the money supply. |
