“In terms of output loss, my assessment is that the worst is almost surely behind us (notwithstanding the second wave),” said external member Chetan Ghate, even as the exact damage caused by the pandemic is difficult to gauge.
Noting that the Consumer Confidence Survey by the RBI in July showed the Current Situation Index at a historic low, external member Pami Dua said: “Clearly, it is important to revive the economy and mitigate the impact of the pandemic, in line with the objective of the monetary policy — to maintain price stability while keeping in mind the objective of growth.”
Though there are “high uncertainties” and “contradictory evidences about the characterisation of the current and future macroeconomic environment”, external member Ravindra Dholakia remained sceptical “about the deep stagflationary conditions”.
“Although the present circumstances are truly exceptional, the primary mandate given to the MPC for inflation targeting at 4 per cent, with the upper tolerance limit of 6 per cent, has to be respected,” said Dholakia, adding that the policy rate transmission was commendable but not complete and hence the central bank must ‘wait and watch’.
All three external members end their four-year term in September, and a new set of external members will take charge in October. Among internal members, executive director Mridul K Saggar was the new member, succeeding Janak Raj.
“Growth estimates for FY21 are difficult to arrive at, in the current juncture, but there could be downward bias to the present consensus estimates, when the final data becomes available. Inflation, on the other hand, may have an upward bias,” said Saggar.
Deputy governor Michael Patra was disappointed with the inflation surprises, blaming them on “supply disruptions and unrelenting cost push interventions in price formation”. This is outside the ambit of monetary policy and has complicated its conduct, especially as inflation levitation seems to show persistence.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.