Indian monetary policy makers seen tolerating high inflation for growth

 Data later today might show wholesale prices grew 13.3%, the highest rate in three decades, it's unlikely just yet to fully feed into consumer prices.

Indian monetary policy makers’ intolerance for an inflation rate higher than their 4% medium-term target will probably only stay on paper.
In reality, economists see the Reserve Bank of India grin and bear price pressures as it seeks to help Asia’s No. 3 economies recover from one of the world’s worst coronavirus outbreaks. The RBI has chosen to look through a recent surge in inflation because it was supply-side driven, and will only turn persistent when demand kicks in, Deputy Governor Michael Patra said at a briefing on June 4.

While the wholesale price print due later Monday will probably make for another grim reading, retail inflation is seen hovering above the 5% mark for the third out of five months this year. Monetary policymakers ignored the acceleration and earlier this month retained an “accommodative” stance for as long as needed to restore growth on a durable basis.

“The RBI has clearly turned more tolerant of inflation and by the looks of it, they seem to be okay with the headline rate above the mid-point target of 4%,” said Priyanka Kishore, head of India and Southeast Asia Economics at Oxford Economics in Singapore. “We expect growth concerns to dominate and push out policy normalization well into 2022.”