Spreading disinflation over 2-3 years to reduce output loss, says RBI

Source: Business Standard

Relevance: Addressing various issues ailing the financial sector of the Indian economy.

Synopsis: RBI Governor Shaktikanta Das, other deputy governors took questions from the media and addressed the raging topics in the financial sector.

Here is what he had to say regarding RBI’s view on various issues.

On inflation
  • Between 2016 and 2020, RBI had kept inflation at 4%.
  • Owing to the pandemic, inflation went up to 6.2% on average.
  • Now, looking at average inflation of 5.7%, from a historical perspective, is a remarkable improvement over 2021.
  • So, the path of inflation is being set downwards to reach 4%. RBI is aiming for disinflation (a decrease in the rate of inflation) over a period of 2-3 years so that the loss of output is minimized.
On current account norms 

Regarding the current account norms for small borrowers –

  • There is no blanket ban on opening of current accounts. RBI have been quite flexible. And now taking into consideration some concerns put out by banks, RBI have extended the timeline.
  • Further, RBI is trying to address the issues in consultation with the Indian Banks’ Association and banks.
On Govt’s fiscal measures

RBI’s views on government’s fiscal measures:

  • As far as fiscal support is concerned, it has been very prudent, calibrated, and responsive.
  • Initially, the focus was on the marginalized sections of society, which then shifted to sectors that were under stress due to the pandemic.

Terms to know:

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