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Government Will Not Release RBI Letter On Inflation Target Miss

The government will not release the letter from the Reserve Bank of India, in which the regulator explained the reason behind missing the inflation target for nine straight months.

In his response to queries in the Lok Sabha, Pankaj Chaudhary, minister of state at the ministry of finance, said that the government was in receipt of the RBI’s letter in the matter.

The consumer price inflation index has ranged above the mandated 4% plus or minus 2% target band since January. Section 45ZN of the RBI Act, as well as provisions of the monetary policy process regulations framed in 2016, require that the regulator write a letter when the MPC fails to meet the target range for nine consecutive months.

The regulator held an extra meeting of the monetary policy committee on Nov. 3 to discuss the contents of the letter to the government.

“The said provisions of the RBI Act and regulations therein do not provide for making the report public,” Chaudhary told the parliament on Monday.

Last month, RBI Governor Shaktikanta Das defended the MPC’s decisions in the face of persistently high inflation when he spoke at the annual banking conclave of the Indian Banks’ Association.

The RBI’s approach to tackling inflation has been the right one, Das had said then, even though there have been calls from some quarters that the central bank should have started tightening monetary policy much earlier.

The Covid-19 pandemic, Russia’s invasion of Ukraine, and prevailing conditions in the financial markets have all been negative surprises that India has had to deal with, the RBI Governor has said. Had the central bank started hiking rates earlier than it did, it could have proven very costly for the citizens as economic growth could have slumped, he said.

Das had also said that any communication between the RBI and the government is privileged information and he does not have the right to disclose the letter.

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