Price stability crucial for high sustainable growth: RBI

MUMBAI: Price stability is crucial for high sustainable growth, said the Reserve Bank of India in its monthly bulletin released on Friday. Bringing inflation down will revive consumer spending, and boost corporate revenues and profitability, it added.

“It is axiomatic that the path to high but sustainable inclusive growth has to be paved by price stability. Once this is realised, the trade-offs and dilemmas confronting the conduct of monetary policy fade away,” noted the bulletin released on Friday.

Bringing down inflation, as well as market and household expectations of future inflation would be key to reviving private capital expenditure. The national accounts data and corporate results when read in conjunction clearly show that inflation is slowing down personal consumption expenditure, noted the bulletin.

“This, in turn, is moderating corporate sales and holding back private investment in capacity creation. Bringing down inflation and stabilising inflation expectations will revive consumer spending, and boost corporate revenues and profitability, which is the best incentive for private capex,” it said.

India’s real GDP growth in the fourth quarter of 2022-23 at 6.1% was the highest among major economies of the world, noted the bulletin. As a result of six back-to-back hikes since May 2022 by the RBI, prices have begun to cool.

The government has mandated the RBI to ensure retail inflation remains at 4 per cent, with a 2% margin on either side. The consumer price index-based retail inflation came down to 4.25% in May. The retail inflation rate dropped for the fourth month in a row in May, falling to 4.25% from 4.70% in April.