Jagran Bureau, New Delhi. The fear of inflation which has inflated the breath of the central banks of the whole world (RBI)RBI) is also there. RBI’s Monetary Policy Committee in JuneMPCThe kind of concerns expressed by all the members of the committee about inflation in the meeting, it is also clear that the process of increasing the repo rate is going to continue. In May and June 2022, the RBI has increased the repo rate (the main statutory rate that decides the interest rates) by a total of 0.90 percent. But the threat of inflation has not subsided. RBI governor Dr. Shaktikanta Das In the words of “Inflation continues to be a major concern, with economic activity recovering rapidly but now pulling up”.

Another member of the committee and Deputy Governor of RBI Dr. Michael Patra says that if inflation gets out of hand, then it can prove to be dangerous for the economic recovery. He has given four reasons why inflation rate above 6 percent is dangerous for India. The first reason is that it is fatal to efforts to accelerate the pace of economic growth. Second, it will be difficult for companies to make investment decisions as there is uncertainty about the prices of the products. Third, the uncertainty surrounding bank deposits increases and people can start investing in gold etc. India is already the second largest importer of gold in the world. Fourthly, the rupee weakens, making imports costlier and it reappears on inflation.

In such a situation, every effort should be made by the RBI to keep inflation within its prescribed band (4 to 6 percent) so that the economic growth rate in the year 2022-23 and 2023-24 remains between 6-7 percent. In May 2022, the rate of retail inflation in India has been 7.04 percent. For the past five months, the inflation rate has consistently remained above the target set by the RBI.

Further increase in the repo rate is indicated by the statement of the RBI Governor that its rate has not yet reached the level before the start of the epidemic. He has assured that the interest rate hike will be done in such a way that the pace of growth is not affected much. In the last meeting, he had also advocated an increase in the repo rate by 50 basis points. All the members of the committee supported the proposal to increase the repo rate by 0.50 percent. Another member of the committee, Dr. Rajeev Ranjan has also talked about the contribution of the Central Government and the State Governments in the fight against inflation and urged them to improve their financial management as well. If the central and state governments borrow more or spend more, then even that gets the wind of inflation.

Edited By: Manish Mishra