Inflation's long shadow

 The Reserve Bank of India is finally acting to rein in galloping prices

The Reserve Bank of India (RBI) is now serious about controlling inflation. Just a month after the off-cycle meeting of the Monetary Policy Commission (MPC) to raise the interest rate, the panel has decided to increase the policy repo rate by 50 basis points making it clear that MPC no longer intends to be accommodative. The commission focuses to anchor the inflation in the 2-6% band. The MPC now projects the inflation rate to be 6.7%, 1% more than it forecast for 5.7% earlier. Prices are now expected to accelerate at 7.5% in the April-June quarter, 120 basis points more than estimated earlier. The MPC listed the factor clouding inflation: the Ukraine war, elevated commodity prices, heat waves destroying crop output, increasing fuel prices, and more. Inflation looms over the economy worldwide. Growing stagflation is causing volatility in the global financial market. The RBI has cited an ongoing recovery and expects to boost rural consumption from Kharif output. Post-May 21, cuts on excise duty on petrol and diesel may give hopes to RBI for moderation in inflation. RBI Governor Shantikanta Das has requested states to soften inflationary pressure by further reducing the VAT taxes on fuels. This will allow more economic activities in the country which can help reduce inflationary factors.