At a time when our farm sector is going through turmoil, we have a spot of good news on the monsoon front. Skymet, a private meteorological agency, on Tuesday forecast a reassuring likelihood of India receiving normal levels of rainfall this year. If so, 2021 would be the third consecutive year of good rains for the country.
This bodes well for food production and should help keep a lid on some of our inflationary pressures. On Monday, data released by the government showed retail inflation at 5.52% in March, nearly half a percentage point higher than February’s reading, driven up partly by food prices. Although it’s still short of the Reserve Bank of India’s upper bound of 6%, any sharp rise raises anxiety over a possible overshoot. Monetary policy has been extra-loose for over a year now, and banks are inundated with liquidity. The central bank’s policy guidance made a subtle shift last week, suggesting a closer vigil on price movements and a need to keep its options open. After all, its inflation-targeting mandate had only just been extended for another five years. Favourable rainfall this year will reduce the risk of rising food bills clouding up its easy-money policy.
Courtesy - Livemint.
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