Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
4.In what way persistent high inflation in the recent times has undermined RBI’s effort to revive growth in the country? Analyse. (250 words)
Reference: Indian Express
Why the question:
Recently, India’s growth rate had decelerated sharply to a six-year low. The rate of Inflation remained persistently high until Covid disruption made worse situation for government as well as RBI in the recent times.
Key Demand of the question:
Analyse in detail how persistent high inflation in the recent times has undermined RBI’s effort to revive growth in the country.
Analyze – When asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary.
Structure of the answer:
Start with some key data or stats showing persistent inflation in the country.
The answer body must have the following aspects covered:
Firstly, discuss the underlying factors of inflation.
Then move on to discuss the concerns before RBI ; for central government and RBI, it is not just a matter of core inflation but also maintain enough liquidity in the market. Now, even the core inflation rate has continued to climb all through the year and is now threatening to breach the levels set for headline inflation. The ongoing inflation spiral is being fuelled by supply chain disruptions, excessive margins and indirect taxes. Increase of repo rate is not sufficed to raise indirect taxes, decrease fuel prices etc. Capacity utilisation in firms is low and they are laying off employees to cut back costs.
Suggest what needs to be done.
Conclude with solutions to address the issue.