Demolishing expectations that central bank has shifted focus from inflation management to growth, the Reserve Bank of India (RBI) governor Raghuram Rajan has said that keeping fight with high inflation will remain at the top of agenda and call on raising interest rates will be taken after factoring more macro-economic data particularly inflation and industrial growth. The RBI in its monetary policy review on December 18 has kept key policy rates unchanged citing that continued weakness in industrial activities and subdued domestic demand have become headwinds to domestic economic growth, therefore, it has become imperative to revive the stalled investment.
By adding further, Rajan has asserted that targeting inflation does not mean that the central bank will not pay attention to economic growth. The level of growth in the economy tells how much disinflation is already in the system. The RBI wants to contain WPI inflation within the limit of four to five percent. Rising inflation in the country has become a concern for the Reserve Bank of India (RBI), which has been continually raising the policy rates over the past few months in order to trim the inflation.
Meanwhile, wholesale inflation accelerated to 14-month high of 7.52% in the month of November on y-o-y basis as against 7% in October. High inflation in the country is mainly driven by food inflation, which is particularly due to the poor supply side infrastructure and storage facilities in India and thus can be tackled only by easing supply side bottlenecks.
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