RBI's multiple battles

It should not defend currency to contain inflation

The next few quarters will be extremely challenging for the Reserve Bank of India (RBI). The consumer price index-based inflation rate for April surged to a 95-month high of 7.8 per cent. The rate based on the wholesale price index, meanwhile, spiked to over 15 per cent. Most economists expect the retail inflation rate to remain above the central bank’s tolerance band throughout the current fiscal year. The RBI’s Monetary Policy Committee, in an off-cycle meeting earlier this month, raised the policy repo rate by 40 basis points, which marked a significant shift in its outlook. The RBI also increased