Macroeconomic Factors

The retail inflation for January 2021 stood at 4.06 per cent, recording for the third successive fall. The decline was mainly due to a turnaround in food prices. Although the inflation is within the Reserve Bank of India’s (RBI’s) tolerance level, the high fuel prices and escalating input costs for the manufacturing sector need to be addressed. The brokerage house Anand Rathi expects retail inflation in 2021 to be significantly lower than the RBI’s guidance. However, with a record low policy rate, expansionary fiscal policy, continued liquidity overhang, and relatively high core inflation, this brokerage house expects a rate pause during 2022. During the monetary policy announcement in February, the central bank has kept the benchmark repo rate unchanged at 4 per cent in line with expectations. The apex bank maintained a status quo on the policy rate along with an...