RBI must weigh price pressures while formulating its policy
While momentum in the economy has slowed, input as well as output price momentum has remained steady
The seasonally adjusted Nikkei India Composite PMI Output Index recorded a fall in September. The index was down from 51.9 in August to 51.6 last month, and is at its lowest level in four months. As pointed out in these pages earlier, a slowdown in growth is now needed to tame the high current account deficit.
But while momentum in the economy has slowed, the chart shows that input as well as output price momentum has remained steady. The Reserve Bank of India (RBI) must take into account these higher price pressures while formulating its monetary policy.