Governor Shaktikanta Das emphasized the role of monetary policy in contributing to the economy's potential by ensuring price stability.
Mumbai : The Reserve Bank of India (RBI) has reiterated the significance of price stability as a crucial component for achieving high yet sustainable inclusive growth. In its June 2023 bulletin, released on Friday, the central bank emphasized the need to bring down inflation and stabilize expectations to revive consumer spending and drive corporate revenues and profitability.
Governor Shaktikanta Das emphasized the role of monetary policy in contributing to the economy's potential by ensuring price stability. The RBI's bulletin echoed his sentiment, stating that the path to high and sustainable inclusive growth must be built on a foundation of price stability. By prioritizing price stability, the trade-offs and dilemmas faced in conducting monetary policy can be minimized.
The bulletin highlighted the relationship between inflation and personal consumption expenditure, noting that recent national accounts data and corporate results indicate a slowdown in consumer spending due to rising inflation. This decline in consumer spending, in turn, has led to a moderation of corporate sales and hindered private investment in capacity creation.
To address these challenges, the RBI emphasized the importance of reducing inflation and stabilizing inflation expectations. The central bank believes that these measures will help revive consumer spending, bolster corporate revenues and profitability, and provide the necessary incentive for private capital expenditure. By stabilizing prices, the RBI aims to create an environment that promotes sustained economic growth.
The bulletin also emphasized the role of flexible inflation targeting as a framework for monetary policy. The RBI clarified that flexible inflation targeting is not solely focused on a single target, contrary to the belief of critics. Instead, it serves as an approach to preserve and promote growth, taking into account various factors and objectives.
In terms of the overall global economic outlook, the RBI highlighted that while some economies are experiencing slowdowns or contractions, countries like India are rebounding. India recorded the highest real GDP growth among major economies in Q4:2022-23, standing at 6.1%. Additionally, the country's Consumer Price Index (CPI) inflation dropped to a 25-month low of 4.3% in May 2023. The bulletin further mentioned positive indicators such as kharif sowing following a record rabi harvest, a pickup in net profits in the manufacturing sector, credit growth from more durable funding sources, and the stability of the Indian rupee compared to other emerging market currencies.
The RBI's bulletin underscores the central bank's commitment to maintaining price stability as a crucial driver of sustainable inclusive growth. By addressing inflationary pressures and stabilizing expectations, the RBI aims to revive consumer spending, support corporate performance, and foster an environment conducive to economic progress.
Mumbai : The Reserve Bank of India (RBI) has reiterated the significance of price stability as a crucial component for achieving high yet sustainable inclusive growth. In its June 2023 bulletin, released on Friday, the central bank emphasized the need to bring down inflation and stabilize expectations to revive consumer spending and drive corporate revenues and profitability.
Governor Shaktikanta Das emphasized the role of monetary policy in contributing to the economy's potential by ensuring price stability. The RBI's bulletin echoed his sentiment, stating that the path to high and sustainable inclusive growth must be built on a foundation of price stability. By prioritizing price stability, the trade-offs and dilemmas faced in conducting monetary policy can be minimized.
The bulletin highlighted the relationship between inflation and personal consumption expenditure, noting that recent national accounts data and corporate results indicate a slowdown in consumer spending due to rising inflation. This decline in consumer spending, in turn, has led to a moderation of corporate sales and hindered private investment in capacity creation.
To address these challenges, the RBI emphasized the importance of reducing inflation and stabilizing inflation expectations. The central bank believes that these measures will help revive consumer spending, bolster corporate revenues and profitability, and provide the necessary incentive for private capital expenditure. By stabilizing prices, the RBI aims to create an environment that promotes sustained economic growth.
The bulletin also emphasized the role of flexible inflation targeting as a framework for monetary policy. The RBI clarified that flexible inflation targeting is not solely focused on a single target, contrary to the belief of critics. Instead, it serves as an approach to preserve and promote growth, taking into account various factors and objectives.
In terms of the overall global economic outlook, the RBI highlighted that while some economies are experiencing slowdowns or contractions, countries like India are rebounding. India recorded the highest real GDP growth among major economies in Q4:2022-23, standing at 6.1%. Additionally, the country's Consumer Price Index (CPI) inflation dropped to a 25-month low of 4.3% in May 2023. The bulletin further mentioned positive indicators such as kharif sowing following a record rabi harvest, a pickup in net profits in the manufacturing sector, credit growth from more durable funding sources, and the stability of the Indian rupee compared to other emerging market currencies.
The RBI's bulletin underscores the central bank's commitment to maintaining price stability as a crucial driver of sustainable inclusive growth. By addressing inflationary pressures and stabilizing expectations, the RBI aims to revive consumer spending, support corporate performance, and foster an environment conducive to economic progress.
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