RBI could not get government to agree on supply side measures to tackle inflation: Sources

Mumbai, May 5 (PTI) The Reserve Bank of India may have suddenly decided to hike the policy rate due to the government not agreeing on supply-side measures like cutting excise duty on petrol and diesel to control inflation. .

Sources familiar with the thinking of the central bank gave this information on Thursday.

Petrol and diesel prices were hiked by a record Rs 10 per liter within 16 days from March 22, adding to the already high inflation.

RBI has been given a target of keeping inflation at 4 per cent with a variation of 2 per cent. It increased the repo rate by 0.40 percent to prevent inflation from becoming completely uncontrollable.

A source said, “You should look into this measure, as the task becomes more difficult when the RBI stands alone.”

RBI urged the government for measures like reduction in excise duty on fuel, which would have a direct impact on inflation. But this could not happen.

The source said that the central bank also asked the state governments to cut the fee, but here also there was no success.

He further said that in such a situation the RBI said “enough is enough” and now that the time has come to act, it will fight its battle against inflation alone.