In the month of September, the retail inflation rate has been 7.41 percent. For the last nine months, the inflation rate has remained above the RBI’s tolerance level. About which the RBI will now have to give an explanation to the government. The Reserve Bank of India will now have to give a report to the Central Government and explain the reason in detail.
The report will have to explain why inflation could not be kept in tolerance level and what steps are being taken to bring it under control.
If the target fixed for inflation under the Reserve Bank Act has not been achieved for three consecutive quarters, then the RBI will have to report to the central government and give detailed information about the reason and the steps taken to check inflation. This will be the first time since the monetary policy framework came into force in 2016 that the RBI will have to report to the government the full details of its actions.
Under the responsibility given to the Reserve Bank by the Central Government, the RBI has been given the responsibility to maintain the retail inflation rate at 2 to 4 percent. Now the Secretary of the Monetary Policy Committee will have to convene a separate meeting of the MPC to discuss this under the RBI Act and prepare the report and send it to the Central Government. The Monetary Policy Committee mainly discusses retail inflation in the bi-monthly monetary policy review.
One day meeting of the Monetary Policy Committee can be held anytime after Diwali. At present, senior RBI officials have gone to the US to attend IMF and World Bank meetings. Last month, RBI Governor Shaktikanta Das had said that the report to the Center on default in inflation target is a confidential matter between the two parties and will not be made public.
If inflation remains above or below the lower limit on an average for three consecutive quarters, then it will be considered as a lapse in the responsibility of RBI to keep inflation within the prescribed range. The central bank has been increasing the policy rate since May to bring inflation under control. It has so far increased the policy rate by 1.9 per cent, taking the repo rate to 5.9 per cent.
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