30 Years Of Covering Mumbai
Home > Business > 5% Inflation Target A Challenge; Macro Stability Holds Key

5% Inflation Target A Challenge; Macro Stability Holds Key

Wednesday, February 03, 2016
By A Business Reporter

RBI's target to bring down retail inflation at 5% by March 2017 will face some risks from monsoon uncertainty and execution of 7th Pay Panel recommendations, while macro-economic factors will be critical for sustaining growth, Moody's Investors Service said yesterday. It also said that a growth-oriented forthcoming Budget, while controlling inflation at the same time, will help support India's sovereign credit rating.

The Reserve Bank expects retail inflation to be around 6% in January 2016 and lower further to 5% by March 2017. "The budget announcement at the end of February should offer some insight into the Pay Commission implementation, other fiscal measures and their likely impact on growth and inflation.

"If they are successful in promoting growth, while keeping inflation in line with targets, the combination would support the sovereign credit profile," Moody's Investors Service Associate MD (Sovereign Risk Group) Atsi Sheth said. According to her, uncertainty will prevail on monsoon until the middle of calendar year. "Because of the links between weak monsoons and high inflation, monsoon uncertainty will likely constrain monetary policy in 2016, even as subdued global growth poses headwinds to India's economic recovery," she said.

She said this target faces some risks from the implementation of the Pay Commission recommendations and if 2016 is a third consecutive year of weak monsoon. In its final monetary policy for current fiscal, RBI today left the key policy rate unchanged but indicated at accommodative stance saying with "inflation moving closer to the target" there would be more room for rate cut to support growth.

Sheth said RBI's statement underscored that macro-economic stability – as reflected in inflation, fiscal deficit and current account deficit trends – holds the key to sustaining India's growth at a higher level. "This is largely in line with our view,  which is based on our observation that while India's GDP growth has accelerated to much higher levels before, sustaining this high pace for an extended period has often been impeded in the past by a build-up in macro-economic imbalances – such as high inflation and/or twin current account and fiscal deficits," she said.

Therefore, from a sovereign credit perspective, avoiding a build-up in the above imbalances is as important as supporting an acceleration in growth. "The RBI's statement today suggests that policy-makers too are focused on the combination of macro-economic variables (growth, inflation, fiscal and current account deficits), rather than growth alone," she added.

No Comments Posted
City news
An English girl accuses hockey captain Sardar Sin
A Tanzanian woman student was allegedly beaten up
Youth playing police constable's role in a televi
My boyfriend wants to have sexual intercourse wit
Dr. Rajan B. Bhonsle, M.D. (Bom)
Consulting Sex Therapist & Counsellor
Dr. (Mrs.) Minnu R. Bhonsle, Ph.D.
Consulting Psychotherapist & Counsellor
Select Sun sign:
Aries (Mar 21 - Apr 20)
Aries (Mar 21 - Apr 20)An offer of a partnership or joint venture will augur well for you. Some of you will get together with old colleagues and form a joint venture that has the potential for growth. At a meeting or conference you will make a good and lasting impression. Some visitors will drop in to see you. If you are meeting someone with a view for a future together rest assured that you are going to make a good impression.
Tarot for Love
Select Sun sign:
Aries (Mar 21 - Apr 20)
Aries (Mar 21 - Apr 20)What the cards say: Be cautious Path: Give selflessly. Overcome selfish concerns. Don’t react but see the truth of things Ally: Virgo will ground you. Avoid getting into a bind with Leo Card for the week: Tarot key no. IX The Hermit: Be wise and objective. See things as they are and not as you want them to be. The Hermit carries a lantern to show you the right way. Inner resources could come to the surface
- Advertising -
Buying a hair dryer is no walk in the park and th
Stationery items such as pencils and paper are ma
Several beauty brands have an amazing range of pr
Read More