INSUBCONTINENT EXCLUSIVE:
RBI's focus is on economic recovery in the aftermath of second wave of Covid pandemicThe Reserve Bank of India is unlikely to react yet to
multi-month high retail prices as economic recovery remains its prime focus amid the deadly second wave of the pandemic, according to two
The wholesale price inflation rate rose 12.94 per cent, its highest in at least two decades."There is a broad-based increase in CPI
inflation but it still is not driven by demand and that gives the RBI some leeway
They will continue to wait and watch as a rate hike is out of question for now," the first source said.India's economy grew 1.6 per
country which prompted fairly stringent lockdowns across most states causing another round of job losses and a significant dent to
demand.Asia's third-largest economy has now reported 29.57 million COVID-19 cases and 377,031 deaths, though some experts believe the
actual numbers are far higher.The central bank earlier this month reiterated its commitment to keeping monetary policy accommodative as long
as necessary to revive and sustain growth on a durable basis."There is no way RBI can react to inflation at this stage," a second source
said."The maximum push is coming from margins, from supply disruptions, from cost push pressures...but if there is demand, (RBI) will have
But till now, we don't see evidence of demand pressures," he added.The RBI did not immediately respond to a request for comment.At its last
policy review, the RBI warned that high energy prices could stoke inflation
above the general expectations and falsifies the claim that higher WPI does not imply higher CPI," said Rupa Rege Nitsure, chief economist
traders worry the RBI will need to react to inflation sooner rather than later after it breached the RBI's 2%-6% mandated band."This
outcome complicates the direction of monetary policy, however, the RBI is likely to stick with the US Fed's playbook on opting to pin this
spurt on transient cost-push pressures and stay focused on the negative output gap," said Radhika Rao, economist at DBS Bank."Policy
normalisation expectations are likely to be increasingly priced in as vaccination approaches critical mass in first half of 2022," she
