Another six months to get the benefits of credit policy! Says the committee member

 

The Modi government claims that India's financial condition is better than other countries and inflation is relatively under control.  However, Reserve Bank's credit policy committee member Jayant R.Verma said, it may take five to six quarters to see the positive results of the credit policy.  He is optimistic about getting some results from the end of the current financial year.  That is, another six months.  On the other hand, according to a section of economists, the apex bank's model for setting inflation targets does not properly capture fluctuations in food prices due to adverse weather conditions.

• What's the story?

According to Reserve Bank calculations, the ideal rate of inflation is 4%.  It may be more or less 2%.  But last September, the rate of retail inflation increased by 41 basis points to 7.41 percent.  It has been above the apex bank's tolerance limit for the past nine months.  However, they have been aggressively raising interest rates since last May to rein in high rates.

Recently, in the words of Jayanta, "There is no doubt that the price increase will decrease.  Because we have increased the interest rates very quickly.  But it is known to all that the positive effect of the credit policy has to wait for five-six quarters for the price of goods to come down.'' 

In this regard, Kotak Mahindra Bank Senior Economist Upasana Bharadwaj said, "The price of perishable food products has fluctuated rapidly due to extreme weather conditions in the world and also in the country.  Therefore, it was not possible for the Reserve Bank to predict how the price of food products will be in the near future.'' Financial expert and country risk manager of ANZ, Disha Sehgal said, "Rain plays a big role in India, especially in rice production.  Failure of required rains in paddy producing states disrupts production.  Which fuels inflation.  Such situations are difficult to predict in advance.''

• What's next?

Claiming that there is no danger of recession in the country, Jayant says, "The country's financial growth rate is less than what it should be."  But the price increase is higher than the target.  Addressing this problem is a major challenge in setting credit policy.''