........ The statement recognises that the RBI accommodation to banks can only be a marginal support and going forward, the more durable strategy for mitigating mismatches between supply of and demand for funds, is for banks to step up efforts to mobilise deposits. With the more recent upturn of inflation, inflation expectations remain elevated. The policy statement recognises that it is important to break the spiral of rising price pressures in order to curb erosion of financial savings. The policy stance and measures are intended to curb mounting inflationary pressures and manage inflation expectations in a situation of weak growth. The RBI would “ closely monitor inflation risks while being mindful of the evolving growth dynamics.” The RBI has to undertake a fine tightrope balancing act between its legitimate concern for inflation control and the government’s instinctive preference for fostering a revival of growth, particularly in the industrial sector...........
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