The Indian economy is recovering faster than expected and the Reserve Bank of India can now leave the softening trend in interest rates. This has been estimated in a report by Oxford Economics, a global forecasting company. The report said that inflation in the fourth quarter of the current financial year would be above 6 per cent on average and the central bank would maintain policy rates in the December monetary policy review.
Inflation will increase in the fourth quarter
The report said that consumer inflation reached a high level before COVID-19 in October. Prices have increased in almost every category except fuel. Accordingly, inflation will be at its maximum in the fourth quarter and in 2021 we will need to be more careful about this.
In October, retail inflation rose to a six-and-a-half-year high of 7.61 per cent due to the rise in prices of eggs and vegetables. This is more than the satisfactory level of the Reserve Bank. Retail inflation stood at 7.27 per cent in September 2020.
Oxford Economics said that at the same time strong data shows that the economy may be recovering more than anticipated. In such a situation, we are seeing an interesting possibility that the Reserve Bank of India may end the softening trend in interest rates.
Moody’s also improved
The Moody’s Investors Summit has already improved its GDP forecast for India this year to (-) 8.9 per cent in the 2020 calendar year. The economy is making a comeback after a long and tight lockdown but recovery will take time.
Let me tell you that a few days ago, State Bank of India (SBI) chairman Dinesh Kumar Khara gave a statement that the country’s economy is expected to return from the next financial year. He had said that the economy has declined due to Corona epidemic, and it has shown recovery potential.