If the Reserve Bank of India (RBI) is to be believed then the country’s economy has been resilient, growing despite back-to-back blows due to the pandemic since 2019, making the country an island globally, witnessing financial as well as economic stability even as several countries across the world face recession. But despite that, to curb the ever-increasing domestic inflation, the RBI has gone ahead with the third repo rate hike alone this year so far by 50 basis points, taking it to 5.4% even as the Monetary Policy Committee (MPC) sees the domestic fundamentals strong set to improve ahead.
On the contrary, things don’t seem to be improving at all domestically and the same has been even accepted by the RBI Governor who said that the consumer price inflation has remained “uncomfortably high” even though the monetary policy is aiming at keeping the inflation anchored by resorting to hikes in the repo rate which would impact the demand in the market and keep the scale of inflation at a constant, it isn’t really helping. No matter what the aim of the MPC is, the common man is feeling the pressure and weight of inflation with every passing day—something that the Government needs to address.
There sure are effects of the global economic situation, especially the ever-increasing appreciation of the dollar coupled with dormancy in the growth across various other economies affecting the overall upward trend of the figures related to the economy of the country, there is a need for the Government to think of out of the box solutions which would enable the growth of Indian economy, both externally as well as internally, while it continues to be resilient, posturing as an island, growing at its pace, silently.
The effects sure come from the outside which then destabilizes the internal affairs, but there is a need for minimizing the externalities—by ensuring that the imports remain at the lower end while the exports witness an uptick, something that would ensure more dollars coming in and less going out—and allowing the internalities to flourish which would ensure that more money, at least more than what is presently available, goes into the hands of people, which would then help in bringing down the rate of inflation, which the people have been craving for.
With no measures taken, just looking for things to happen, more hikes in the repo rates in months to come should not come as a surprise to the people who are already carrying a lot of burdens; at the same time, the global economic conditions are going to be the same for a while and the dollar is going to witness further appreciation. Amid such a scenario, further fine-tuning of the monetary policy has become inevitable. Thrust has to be on managing the external factors and letting the domestic economy boost up—for that everything is in place, all that is needed is a vision assisted by a working, skillful hand.
