Covid Lockdowns Could Disrupt Supply Chains and Cause Fuel Inflation, Warns RBI
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The Reserve Bank of India (RBI) has warned in its latest report that the resurgent Covid crisis could result in protracted restrictions and disruptions in supply chains, besides creating inflationary pressures. RBI’s ‘State of the Economy’ report highlights key factors to keep India’s inflation under check at 4% amid rising threats of nationwide lockdowns due to the recent spike in Covid-19 cases.

In its newest report, RBI clarifies its role to control the inflation in order to stabilise the nation’s economy in times of grave uncertainties. “When inflation goes beyond the comfort zone, the exclusive concern of monetary policy must be to bring it back to the target,” the report said.

“When inflation is within the comfort zone, authorities can look to other objectives – the objective of control inflation is not independent of the objective of growth,” the report explains. As Times of India reports, there is still no clarity in the projection of inflation numbers for April and May this year, given an uncertain base.

“Going forward, the calculation of year-on-year CPI (consumer price index) inflation print for April and May 2021 is subject to uncertainty, given that April and May CPIs a year ago were not based on actual price data collections but were imputed,” the report adds. It must be noted that there were two key positive developments in this period – a normal monsoon and the easing of crude oil prices over fears of falling demand due to the resurgence of Covid-19 pandemic.

Following the central govt’s recent announcement of its latest vaccination drive for all adults in the age group of 18 to 45, the report says that there has been a positive uplift in the country’s economic activity amid Covid-19’s resurgent onslaught.

“Much attention has been drawn to the wilting of incoming data in the face of the second wave and localised restrictions. Yet, it is important to note that it is the sentiment indicators that have moderated,” the report sums up.

(Source: Times of India)

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