Reserve Bank of India (RBI) Governor Shaktikanta Das announced in early April that the central bank will course-correct. Instead of the earlier priority of putting ‘growth before inflation’, the RBI would now sequence ‘inflation before growth’. The impression sought to be created is that the reverberations of Russia’s invasion of Ukraine rippling across the global economy upended the inflation-growth projections for India, changing the RBI’s priorities. This signalled a change in messaging, as Mr. Das had for months and months been saying that the high inflation eating away at Indians’ savings and spending power was transitory.
However, pressures on prices had started building up long before Russian forces moved, and are proving to be more persistent than the RBI bargained for. Now, the government’s latest inflation data that came days after the RBI’s statements shows a flare-up. Inflation reached a 17-month high of nearly 7% (6.95%) in the month of March, breaching the target level of 4% that the government has set for the RBI, as also the upper tolerance level of 6%. Inflation in clothing is at a 100-month high; footwear at a 111-month high; household goods and services at a 102-month high.
International prices of food, oil, metals, already high, picked up after Russia invaded Ukraine, and companies are passing on the rising costs to consumers, which is broad-basing inflation. But the average inflation rate (6.2%) was above the tolerance band of 2-6% in the fiscal year 2020-21; it continued to rule high for much of 2021-22.
