The RBI’s monetary policy review is due on October 6. WPI inflation rose in August 2021 to 11.4 percent, from 11.2 percent the previous month. While that increase may seem marginal, it’s important to note that average WPI inflation in the last five months has been 11.6%.
Retail inflation, at 5.3% in August, has not only spent two consecutive months below the RBI’s upper tolerance limit of 6%, but has also come down to below the level it was at before the second wave struck.
Given the sheer amount of liquidity made available by the RBI over the last year and more, the fact that retail inflation is low while the Sensex has been scaling new heights suggests that investment activity so far has been restricted to equities rather than factories and that demand is still subdued.
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