Lockdowns could disrupt supplies, fuel inflation: RBI – Times of India

MUMBAI: The Reserve Bank of India has said in its ‘State of the Economy’ report that the resurgence in Covid infections, if not contained in time, risks protracted restrictions and disruptions in supply chains and consequent inflationary pressures. The RBI’s warning comes at a time when prospects of regional lockdowns have increased with rising cases of the disease.
The central bank has said that it was important to entrench India’s inflation at 4% so that it (RBI) can continue to play its stabilising role. “When inflation goes beyond the comfort zone, the exclusive concern of monetary policy must be to bring it back to the target,” said the report in RBI’s Bulletin.
“When inflation is within the comfort zone, authorities can look to other objectives—the objective of control of inflation is not independent of the objective of growth,” the report said. It is not clear how the inflation numbers for April and May will play out, given an uncertain base.
“Going forward, the calculation of year-on-year CPI (consumer price index) inflation prints 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 said. However, two positive developments were the forecast of a normal monsoon and the easing of crude oil over fears of fall in demand due to a resurgence of the pandemic.
Noting that on April 19 the government announced vaccinations for all adults, the report said that economic activity in India is holding up admirably against Covid’s renewed 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 said.
Watch Covid-19: Lockdowns could disrupt supplies, fuel inflation, says RBI