Controlling inflation, whereas boosting family consumption to assist progress remained the primary concern at the latest Monetary Policy Committee (MPC) assembly held between October 4-6, the minutes of which had been launched on Friday.
MPC member Professor Jayanth R. Varma in his assertion wrote that because the August assembly, the dangers to inflation had marginally elevated and “a small shortfall in rainfall coupled with the spatio-temporal dispersion could cause volatility in food prices.” He nonetheless famous that that is more likely to trigger “a few short lived inflation spikes rather than a sustained rise in inflation”.
Highlighting that the outlook for progress had improved modestly due to client confidence as indicated within the RBI surveys, Mr. Varma opined out that this have to be seen within the mild of family financial savings information launched by the RBI in September.
“Data shows that consumers have incurred financial liabilities and reduced savings to support consumption. This willingness to consume at the cost of savings is important because it is household consumption that has been propping up the economy in the face of headwinds from fiscal consolidation, weak external demand and tepid capital investment,” Prof. Varma noticed.
“It is possible that this consumer confidence could become a self fulfilling prophecy as robust consumption demand stimulates growth, generates income and strengthens household balance sheets,” he talked about.
“Even if that does not happen, global experience suggests that a debt fuelled consumption boom can last several years before petering out. Either way, the medium term growth outlook looks somewhat stronger than it did during the last meeting, though several headwinds still remain,” he identified.
Reiterating his emphasis on curbing inflation, MPC member and RBI Deputy Governor Michael Debabrata Patra acknowledged that with out value stability, progress can not maintain and the advantages of increasing Gross Domestic Product and employment can be frittered away by the “erosion of purchasing power, hurting those the most that eke out livelihoods just to meet the costs of food, shelter and bare essentials.”
He noticed that the anchoring of inflation expectations was incomplete and muddied by uncertainty, going by the rise in variability of median expectations of households and the underperformance of revenues of companies relative to their earnings.
“There is also growing evidence that inflation is undermining growth – people are not increasing discretionary spending in view of high inflation and this is slowing sales growth of corporations,” he identified.
“As the economy negotiates the rapids of the second and third quarters of 2023- 24, the trajectory of inflation is being buffeted by price shocks related to perishables. Surprisingly, they are producing inordinately high and painful spikes in the headline that are unacceptable from the point of view of the overall welfare of our societies,” he emphasised.
“If we tame inflation durably, we will prepare the ground for a long innings of strong and stable growth,” Dr. Patra pressured.
