{"id":115679,"date":"2021-06-30T20:31:50","date_gmt":"2021-06-30T15:01:50","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=115679"},"modified":"2021-06-30T20:31:50","modified_gmt":"2021-06-30T15:01:50","slug":"a-question-of-compliance","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/a-question-of-compliance\/","title":{"rendered":"A question of compliance"},"content":{"rendered":"\n<p><strong>Source: <a href=\"https:\/\/www.business-standard.com\/article\/opinion\/a-question-of-compliance-121062901721_1.html\">Business Standard<\/a><\/strong><\/p>\n<p><strong>Relevance<\/strong>: Inflation Targeting is the main tool of fighting inflation.<\/p>\n<p><strong>Synopsis: <\/strong>More transparency and clarity are required over RBI\u2019s way of managing inflation.<\/p>\n<h5><strong>Introduction:<\/strong><\/h5>\n<ul>\n<li>RBI has recently released minutes of the RBI Monetary Policy Committee\u2019s meeting.<\/li>\n<li>It decided to <strong>retain the prevailing repo rate at 4 per cent<\/strong> and continue with the <strong>accommodative stance<\/strong> to revive growth and continue to mitigate the impact of Covid-19 on the economy.<\/li>\n<li>RBI has prioritized growth over inflation.<\/li>\n<\/ul>\n<h5><strong>Why such a move of RBI is the cause of concern?<\/strong><\/h5>\n<ul>\n<li>Firstly, there is <strong>no clarity over what happens if these inflation projections go wrong<\/strong>.\n<ul>\n<li>The June retail inflation number will have to decline to around 5 per cent to be in line with the projections, which is difficult.<\/li>\n<li>Also, Localised lockdown in different parts of the country is not fully reflected in retail inflation.<\/li>\n<\/ul>\n<\/li>\n<li>Secondly, it raises <strong>question over Committee\u2019s compliance of inflation targeting regime.<\/strong>\n<ul>\n<li>As per compliance provision, average inflation above 6 per cent for any three consecutive quarters means a failure to achieve the inflation target.<\/li>\n<li><strong>RBI must submit a report to the Union government<\/strong> stating the reasons for failure, remedial actions, and an estimate of the time within which the inflation target should be achieved.<\/li>\n<\/ul>\n<\/li>\n<li>Thirdly, when retail inflation exceeded the upper tolerance band from March 2020 to December 2020, there was no such report from the RBI.\n<ul>\n<li>Monetary Policy Committee had noted that data for April and May 2020 were collected under the limitations of the lockdown.<\/li>\n<li>The government had clarified that it was due to <strong>short-run supply gaps<\/strong> and <strong>instability<\/strong> in agriculture production.<\/li>\n<\/ul>\n<\/li>\n<li>Lastly, the break in the CPI series is questionable.\n<ul>\n<li>The tolerance band is expected to <strong>allow the MPC to recognize the short-run trade-offs between inflation and growth<\/strong> and enable it to pursue the inflation target in the long run.<\/li>\n<li>It implies that the tolerance band was not able to handle data limitations.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>It shows the Committee had taken the easy way out by not explaining to the government what its perspective was on inflation. Also, the government failed to secure from the RBI a report on inflation.<\/p>\n<h5><strong>Way forward:<\/strong><\/h5>\n<ul>\n<li>Compliance report should be presented as it brings attention back to the need for reining in inflation.<\/li>\n<li>It helps to generate a <strong>public debate<\/strong> on the vital issue affecting the people.<\/li>\n<li>It also helps the government explore policy options to limit the impact of higher prices on its citizens.<\/li>\n<\/ul>\n<p>Hence, RBI should soon return to its primary mandate of adhering to the inflation target of 4 per cent with a permissible upper tolerance level.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: Business Standard Relevance: Inflation Targeting is the main tool of fighting inflation. Synopsis: More transparency and clarity are required over RBI\u2019s way of managing inflation. Introduction: RBI has recently released minutes of the RBI Monetary Policy Committee\u2019s meeting. It decided to retain the prevailing repo rate at 4 per cent and continue with the&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/a-question-of-compliance\/\">Continue reading <span class=\"screen-reader-text\">A question of compliance<\/span><\/a><\/p>\n","protected":false},"author":10316,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[],"class_list":["post-115679","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704841329},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/115679","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10316"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=115679"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/115679\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=115679"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=115679"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=115679"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}