Year Ender 2022: RBI in news for failing to control inflation and digital currency.

Reserve Bank of India (RBI) This year was mixed for While RBI could not keep inflation under control for the first time as per the target. At the same time, he was in the headlines for issuing digital rupee on a pilot basis and succeeding in strengthening the books of banks through his efforts. Now that inflation is coming within the range of the target, in such a situation, the emphasis in the new year can now be on speeding up the economic growth. Special focus is expected on GDP (Gross Domestic Product) growth, especially considering the increase in policy rate to 2.25 per cent from May 2022 onwards. An increase in the policy rate can have an adverse impact on economic growth. According to official data released on October 12, overall inflation remained above 6 per cent.

Inflation remained above the target for nine consecutive months

With this, it was the first time that retail inflation remained above the ceiling of 6 per cent for the ninth consecutive month. Because of this, the government had to write a letter to the RBI as per the system and explain why it could keep inflation under control as per the target. Along with this, it also had to be told that when can the inflation come down to 4 percent. The RBI has been entrusted with the responsibility of keeping the retail inflation rate within a range of 2 per cent to 4 per cent i.e. 2 per cent to 6 per cent. One of the main reasons for rising inflation was Russia’s attack on Ukraine in February this year. This affected the prices of commodities especially crude oil. However, India’s position in terms of inflation is better than other countries and it was a matter of relief. In many countries the inflation rate has reached the highest level of 40-40 years. To bring the rising inflation under control, the Monetary Policy Committee of RBI suddenly met and increased the key policy rate repo by 0.40 percent on May 4 this year. Earlier, the repo rate was kept unchanged for a long period of time.

Big increase in repo rate thrice

Many experts said that the RBI delayed taking steps to curb inflation. However, the central bank denied this and said that it had taken the initiative in time. After that, the repo rate was increased by 0.50-0.50 for three consecutive times and by 0.35 percent in the bi-monthly monetary policy review in December. RBI increased the repo rate by 0.35 percent in December and also indicated that the pace of increase in the policy rate will now slow down. Retail inflation eased to 5.8 per cent in November. In view of this, many analysts have said that the increase in the policy rate will stop in the coming times. This is also confirmed by the latest minutes of the MPC meeting. One of the reasons for this is also to speed up the economic growth.

reduced the forecast of economic growth

RBI has reduced the estimate of the economic growth rate for the current financial year to 6.8 percent. The rise in inflation also led to a significant depreciation of the rupee against the dollar. In view of this, the central bank intervened in the market. This has reduced the total foreign exchange reserves by more than $100 billion. RBI also took other steps to hold the rupee. This includes promoting bilateral trade in rupees and encouraging Indians living abroad to make bank deposits. The central bank has been in the news for issuing digital rupees on a pilot basis and succeeding in strengthening the balance sheets of banks through its efforts. RBI issued Central Bank Digital Currency (CBDC) on a pilot basis for both wholesale and retail use. Along with this, the financial health of the banks has also improved this year. There has been a significant reduction in bad loans in banks. This could be the result of the steps being taken by RBI for the last five-six years.