RBI’s State of the Economy report said, “Bringing down inflation and stabilizing inflationary expectations will lead to increased consumer spending and increased corporate revenue and profitability, which is the best stimulus for private capital expenditure.”
The report cited national accounts data and corporate results to show that inflation is slowing personal consumption expenditure. The statement came after top economists in the finance ministry said that the slowdown in consumption demand during recent quarters cannot be compared as the estimates currently available are preliminary and have not been seasonally adjusted. These officials have said that consumption demand remains strong and have interpreted the data to argue that private sector capital spending is showing an increase.
reserve Bank of India The report also said that despite holding rates, the central bank is tightening policy in the short term, leading to a rise in inflation-adjusted interest rates.
Analysts believe the RBI’s tough stance indicates that policy rates will remain ‘high for a long time’ – a term used to indicate that rate hikes are not rolled back soon after the pandemic May go.
“By keeping the policy rate unchanged, monetary policy has effectively tightened in the near term in terms of the real policy rate, while monetary policy is expected to work by maintaining a positive real rate for the first four quarters, its Looking at the gap,” said. The report is authored by RBI Deputy Governor Michael Patra and his colleagues.
The State of the Economy report was released by the RBI a day after the central bank made public the minutes of the last MPC meeting on June 8.