Public disclosure of confidential correspondence from RBI to the government, especially those that contain remedial actions, can “unmoor expectations and impede monetary policy transmission” which, in turn, can dampen growth prospects and hurt the state’s economic interests, the news daily reported RBI as saying.
The Indian government will not make public a Reserve Bank of India’s (RBI) recent letter on inflation, state minister of finance Pankaj Chaudhary as saying back in December. The minister cited the RBI Act of 1934 for not making the inflation report public, in response to questions asked in a parliamentary session.
Under Section 45ZN of the RBI Act, the central bank needs to set out in a report to the Central Government the reasons for failure to achieve the inflation target; remedial actions proposed to be taken by the Bank; and an estimate of the time-period within which the inflation target shall be achieved pursuant to timely implementation of proposed remedial actions.
The RBI’s monetary policy committee met in November to discuss the bank’s report to the government for having failed to meet its inflation targets for three straight quarters for the first time since it was set up in 2016.
Speaking at a banking conclave in November, RBI Governor Shaktikanta Das had said the central bank doesn’t have the authority to make its explanatory letter to the government public. He had, however, said the contents would be made public in due course as the letter would go to Parliament.
“I don’t have the privilege, authority and luxury to release it (the letter) to the media before even the addressee gets it,” Das said Wednesday. “The first right of receiving the letter lies with the government. In due course, sooner or later, it will be out. Nobody is hiding anything from the public, but it is a question of time.”However, the letter was not released.
The RBI projected retail inflation to ease to 5.3 per cent in the next fiscal from 6.5 per cent this year, even though core inflation remains sticky.
The RBI’s inflation outlook for the current fiscal has improved from 6.8 per cent projected earlier, to 6.5 per cent, on the back of steeper than expected decline in vegetable prices and Indian basket of crude at USD 95 a barrel.
Higher inflation has been a concern for central banks across the globe, including India, as the uncertain nature of the Russia-Ukraine war compounded supply side disruptions in the post-pandemic world that was barely going through a nascent recovery from economic shocks.
The recovery was accompanied by rising global commodity prices as pent-up demand overwhelmed supply. The outbreak of the conflict aggravated the commodity upcycle and almost obliterated the supply chains of key critical commodities such as coal, metals, edible oils, and crude oil, with the latter two being essential and major imports of India.