Why isn't RBI doing anything about inflation?

BILAL KHAN | Last updated: 02 September 2021

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Quick Summary

You're likely feeling the pinch of inflation, with retail inflation currently above the RBI's tolerance limit. This article explains that the Reserve Bank of India (RBI) is intentionally keeping interest rates low and injecting money into the economy through measures like open market operations. The goal is to stimulate economic growth, which has been sluggish due to the pandemic. While this strategy increases money supply and spending, it also contributes to rising prices. The RBI plans to address inflation once the economy is back on a stable footing.

Lighter pockets? You might be wondering why you are facing all this. Well, the one-word answer for this is Inflation. As per recent CPI-Gen (CONSUMER PRICE INDEX): A measure of retail inflation stats issued by NSO Along with MOSPI, the CPI stands at 6.26% in June 2021 compared with May 21 of

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FAQ :

As per recent CPI-Gen data, retail inflation stood at 6.26% in June 2021, which is above the RBI's tolerance limit of 2-6%.

Inflation is largely driven by increases in food prices, oil, and fuel, coupled with an increased money supply in the economy.

The RBI uses instruments such as the repo rate, reverse repo rate, and open market operations (buying and selling government securities).

The RBI is keeping the repo rate low at 4% to encourage banks to borrow and lend money at lower rates, thereby increasing the money supply and stimulating economic growth which has been affected by the pandemic.

Open market operations involve the RBI buying and selling government securities in the open market to manage the money supply within the economy.

The article suggests that the RBI will take measures to control inflation once the economy has recovered and is back on track.