The Indian government will not make the Reserve Bank of India’s (RBI) recent letter on inflation public, Minister of finance Pankaj Chaudhary. The central bank monetary policy committee met last month to discuss the bank’s report to the government for having failed to keep inflation below 6% for three straight quarters for the first time since it was set up in 2016. In his response to a question raised in the Lok Sabha, Chaudhary said, “RBI has furnished a report to the central government, as mandated under Section 45ZN of the RBI Act, 1934 and Regulation 7 of RBI Monetary Policy Committee and Monetary Policy process Regulations, 2016. The said provisions of the RBI Act, 1934, and Regulations therein does not provide for making the report public.”
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Earlier, RBI governor Shaktikanta Das had said that the RBI letter to the government, set under the flexible inflation targeting (FIT) framework, is a “privileged communication” and will not be made public. Note that under the framework, RBI is expected to maintain consumer price-based inflation (CPI), or retail inflation, at 4 per cent with a band of +/-2 per cent. In case of failure to maintain the inflation target for three consecutive quarters, the RBI has to write to the central government explaining the reasons for missing the target. In the letter, the RBI will have to mention about the proposed remedial actions it plans to take and the estimated time-period within which the inflation target will be achieved.
“It (letter) is a privileged communication between the Reserve Bank and the government. From our side, we will not make it public,” Das told reporters in November when asked if the RBI will make the letter public. Earlier this month, the Reserve Bank of India Monetary Policy Committee raised the repo rate by 35 bps, in-line with expectations. The RBI MPC is widely expected to deliver one more repo rate hike in February 2023, before pausing the hike cycle, even as the full impact of past rate hikes and liquidity tightening measures is yet to be seen amid moderation in inflation, according to analysts.
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The Consumer Price Index (CPI)-based inflation has been hovering above 6 per cent since January this year. The statistics ministry will release CPI inflation data today for the month of November. Inflation is expected to have cooled off to a nine-month low of 6.40% last month mainly on account of moderation in food prices, according to a Reuters poll of economists which predicted the second consecutive decline in inflation to an annual 6.40% from 6.77% in October. Forecasts were in a 6.00%-7.02% range.