Amid India’s struggles with rising prices, keeping inflation under control stands as a pivotal task for Narendra Modi’s government in the upcoming interim budget. The administration will have to implement measures aimed at permanently curbing the upward trajectory of prices, while in recent months it has taken many steps including export bans or limits.
The Reserve Bank of India (RBI) is tasked with bringing down the high inflation levels within its tolerance band of 2-6 percent. However, inflation rate in India has been too inflexible to come down to the midpoint of the central bank’s comfort level.
The year began with inflation hovering around 6.5 percent, above RBI’s tolerance band of 2-6 percent. The RBI has implemented measures to combat this economic concern. RBI governor Shaktikanta Das has often referred to keeping “Arjuna’s eyes” on galloping inflation, which has upset consumers in India and preoccupied policy makers in 2023.
Food inflation stands as a significant driver of price spikes, exacerbated by unpredictable weather patterns. Unseasonal and uneven rainfall in recent years has also compounded the challenges faced by policymakers.
The government’s anti-inflationary policies may include strict fiscal and monetary discipline, rationalization of essential commodity taxes, effective supply-demand through liberal customs policies and strengthening of the public distribution system.
In light of the general inflation, the upcoming budget assumes critical importance. The budget’s focus on mitigating food supply volatility can potentially stabilize food inflation and elevate India’s inflation management.
The Consumer Price Index (CPI) remains pivotal, reflecting the average spending of urban consumers on goods and services. The stability of the CPI, or lack thereof, is set to influence fiscal strategies outlined in Budget 2024.
Finance Minister Sitharaman may introduce fiscal measures such as tax cuts to fight rising prices and address persistent inflationary trends. Experts recommend a balanced mix of fiscal and monetary policies to mitigate the impact of inflation amid uncertainties.
The interim budget must, however, tread carefully in selecting schemes and new programs, ensuring growth incentives without jeopardizing efforts to contain inflation.
The main objectives of the interim budget on February 1 are likely to be to boost exports, reinforce the progress made in attracting investments to strategic and emerging sectors, reducing the current account deficit, and chart a definitive path to robust economic growth while maintaining fiscal consolidation. efforts
Frequently Asked Questions about BUDGET
1. What is inflation? A widespread increase in the cost of goods and services within an economy indicates inflation, which is a decline in the purchasing power of money.
2. What is the inflation rate in India?
The average opinion among analysts is that inflation, as determined by the annual change in the consumer price index (CPI), increased from 5.55% in November to 5.87% in December.
3. How is inflation managed in India?
Through monetary policy, the Reserve Bank of India (RBI), the nation’s central bank, is essential to keeping inflation at bay. To influence the money supply and credit in the economy, the RBI modifies important interest rates, such as the repo rate.