The Reserve Bank of India (RBI) on Thursday revised upward its CPI inflation target to 6.5 per cent for Q4 of current fiscal. It also set an inflation target of 5.4-5.0 per cent for first half of 2020-21 and 3.2 per cent for third quarter of 2020-21.
While presenting its monetary policy where the apex bank kept repo rate unchanged at 5.15%, RBI said path of inflation is elevated and on a rising trajectory through Q4 of 2019-20. The outlook for inflation is highly uncertain at this juncture.
The MPC notes that inflation has surged above the upper tolerance band around the target in December 2019, primarily on the back of the unusual spike in onion prices.
Given the evolving growth-inflation dynamics, the MPC felt it appropriate to maintain status quo. Accordingly, the MPC decided to keep the policy repo rate unchanged and persevere with the accommodative stance as long as necessary to revive growth, while ensuring that inflation remains within the target.
RBI has set the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of plus or minus 2 per cent, while supporting growth.
By Aseem thapliyal