The Reserve Bank of India (RBI) governor Raghuram Rajan, after keeping the interest rates unchanged in its sixth bi-monthly credit policy, has said that inflation is still a concern for the central bank and the monetary policy continues being “conventional”. He further stated that given the deflationary environment elsewhere, it is actually easier for us because we are not fighting inflation in an environment where inflation is picking up elsewhere.
Rajan stated that emerging markets have different problems from developed markets on inflation and the medium-term view of inflation was more important than short-term view, as Lower inflation increases disposable income and propensity to save. Going further, for increasing the saving rate, which has dipped to 30 percent, Rajan also advocated for increasing the tax benefit for small investments in financial instruments like PPF, PF, insurance policies etc under Sec 80C.
Indian CPI inflation increased for the first time in five months to 5 percent in December of 2014 from a record-low of 4.38 percent the previous month, still remaining well within the RBI medium-term target of 6 percent. While the wholesale price index (WPI) rose 0.11 percent year-on-year.
