Mint Explainer: How inflation changed its texture in India
- It's a change that will make monetary policy more effective.
On Tuesday, the World Bank raised its growth projections for India from 6.5% to 6.9%, arguing the country’s domestic market insulates it to an extent from a global slowdown. On Wednesday, the Reserve Bank of India raised the repo rate once again to temper inflation, marginally lowering its growth forecasts for India. RBI governor Shaktikanta Das said the “worst of inflation is behind us". But perhaps even more importantly, the texture of inflation in India is changing. While earlier it was imported inflation due to the surge in global commodity prices, it is now driven more by domestic factors, particularly food prices. It essentially means that RBI’s monetary policy will be much more effective in cooling prices, bringing inflation within its tolerance band of 4% to 6% faster. Here’s what the World Bank projections mean for India.
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