RBI has Arjun's eye and Arjun's quiver !

RBI Governor Shri.Shaktikantadas emphatically enunciated RBI's policy for containing inflation in the month of Nov22 by calling its focus as "Arjun's eye"!

In Mahabharata Arjun is eulogised for his single minded focus on hitting the targets with unwavering skill.

RBI has succeeded in its mission in the last one year largely, by reducing the CPI inflation keeping it within the band of 2% to 6% for the last few months with occasional jump beyond the upper band of 6% induced by food inflation.

In the recent policy press meet RBI Governor went one step ahead and mentioned that he has Arjun's quiver with all its arrows and weapons to tackle the inflation if it rears its head. He specifically mentioned that OMO being one such weapon is still in Arjun's quiver. He hastened to add at the end of the press conference that the Arjun's analogy is only meant to say that all kinds of weapons to kill the inflation are at his command and not to equate himself with the larger than life hero Arjun of Mahabharatha.

Leaving aside Arjun's eye and quiver, RBI's recent policy is pedantic but keen on keeping the ship steady with monetary policy in sync with the Govt's Fiscal policy. RBI is doing a tight rope walking conscious of not doing excessive liquidity tightening which can hamper growth when General elections are just round the corner and also not loosening its grip on liquidity which can bump up the inflation.

Since the elephant in the room is General Elections due next May, Govt. will have to work in tandem in showing fiscal rectitude by not overshooting its Fiscal deficit target of 5.9% of GDP this year since higher GDP growth itself can generate heat in the economy pushing up the inflation.Added to that will be Govt.spending on Capex & others and other Election spending by parties splurging on liquidity and RBI is mindful of these monetary quagmires.

RBI will be presenting two more Monetary policy updates- in Feb 24 and April 24 before the General elections and will do everything in its ability to rein in inflation if it reaches uncomfortable levels.

Fortunately all PSU banks are in ship shape with low NPAs and sufficient provisioning which gives large elbowroom for the Central bank to manage the liquidity in the system and thereby keeping inflation in a leash. The factor beyond RBI or GOI's control is Oil and other Commodity prices which can rock the boat.However RBI fortunately has Arjun's quiver to quell the inflation!

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