BALANCE
BETWEEN GROWTH & INFLATION: ECONOMY
NEWS: Balance between growth and inflation is unsettled,
says RBI Governor Das
WHAT’S IN
THE NEWS?
Balancing
inflation and growth with strategic tools, reducing inflation to sustainable
levels for economic stability.FY25 GDP growth revised to 6.6% (temporary
factors); tight liquidity due to tax outflows, FPIs, and seasonal cash demand.
Monetary
Policy and Inflation-Growth Balance:
- RBI focuses on balancing
inflation and economic growth using strategic policy tools.
- Flexible inflation-targeting
framework is key for long-term stability.
- Reducing inflation to
sustainable levels is crucial for balanced growth.
- Timely actions are essential
for effective policy outcomes.
FY25 GDP
Growth Projections Reduced:
- Revised from 7.2% to 6.6%
due to temporary factors, not structural trends.
- Earlier high growth rates
(8%) included post-pandemic rebound effects.
- H2 FY25 shows recovery with
projections of 6.9%-7.3% growth.
Liquidity
Challenges:
- Tight conditions anticipated
due to:
·
Tax
outflows (direct taxes and GST).
·
Increased
currency circulation (agricultural credit and harvest season).
·
Foreign
Portfolio Investor (FPI) exits.
- Temporary CRR increase normalized.
Growth
and Inflation Dynamics:
- Q2 GDP growth slowed,
inflation surged (food prices, weather impact).
- September and October food
inflation exceeded expectations.
- RBI’s immediate focus: bring
inflation closer to the target.
GDP
Estimate vs. Q2 Data Differences:
- Demand-side: reduced
investment activity.
- Supply-side: manufacturing
downturn due to weak sales and urban demand impact.
- Businesses rely on existing
capacity, suppressing new investments.
Secured
Overnight Rupee Rate (SORR):
- A new benchmark by FBIL
integrates secured transactions and TREPS, replacing older indices.
- Provides a comprehensive and
accurate market benchmark.
Tariff
War Implications:
- Retaliatory measures (e.g.,
currency devaluation, tariffs) could follow.
- Broader economic impacts
make isolated effects uncertain.
Source
: https://www.thehindu.com/business/balance-between-growth-and-inflation-is-unsettled-says-rbi-governor-das/article68955319.ece#:~:text=We%20have%20given%20the%20numbers,growth%20also%20to%20pick%20up.