Retail inflation to remain above 9 per cent, cautions RBI

The Hindu A file picture of retail market in Old Delhi. Photo: Shiv Kumar Pushpakar. The common man is unlikely to get relief from rising prices in the months ahead, with the RBI on Tuesday saying retail inflation will remain above 9 per cent during the course of this financial year.

Retail inflation measured by the consumer price index (CPI) has risen sharply across food and non-food constituents, including services, keeping inflation expectations high, the Reserve Bank of India said in its Second Quarter Review of Monetary Policy 2013-14.

“Notwithstanding the expected edging down of food inflation, retail inflation is likely to remain around or even above 9 per cent in the months ahead, absent policy action,” the central bank said.

RBI Governor Raghuram Rajan pitched for an appropriate policy response to tame wholesale as well as retail inflation.

“Overall WPI inflation is expected to remain higher than current levels through most of the remaining part of the year warranting an appropriate policy response,” Dr Rajan said in the monetary policy review.

Inflation as measured by the wholesale price index (WPI) accelerated in September for the fourth month in a row to 6.46 per cent. Retail inflation rose marginally to 9.84 per cent in September, mainly due to a hike in food prices, particularly of vegetables.

The RBI said food price pressures may ease with the arrival of the kharif harvest and seasonal moderation. Food inflation in the WPI basket stood at 18.40 per cent in September.

The RBI on Tuesday hiked the lending (repo) rate by 0.25 per cent to 7.75 per cent, saying it was important to break the spiral of rising price pressures in order to curb the erosion of financial saving and strengthen the foundations of growth.

The policy stance, the central bank said, “is intended to curb mounting inflationary pressures and manage inflation expectations in a situation of weak growth.”

The RBI said it plans to introduce inflation-indexed National Saving Securities for retail investors in November or December in consultation with the government.

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Legal Protection in Retail Financial Markets

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Oxford Journals Contact Us My Basket My Account Review of Corporate Finance Studies About This Journal Contact This Journal Subscriptions View Current Issue (Volume 2 Issue 1 March 2013) Archive Search Oxford Journals EconomicsSocial Sciences Review of Corporate Finance Studies Volume 1 Issue 1 Pp. 68-108. Legal Protection in Retail Financial Markets Bruce Ian Carlin

University of California, Los Angeles Simon Gervais

Duke University Send correspondence to Bruce Ian Carlin, Anderson School of Management, University of California, Los Angeles, 110 Westwood Plaza Suite C413, Los Angeles, CA 90095; telephone: (310) 825-7246. E-mail: bruce.carlin{at}anderson.ucla.edu; or to Simon Gervais, Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NC 27708-0120; telephone: (919) 660-7683. E-mail: sgervais{at}duke.edu. Abstract We model a retail financial institution that outsources its advice services to an intermediary, making the two parties jointly responsible for consumers' experience with the products. In this context, courts that enforce state-contingent legal rules are necessary in order to avoid market breakdowns. To maximize social welfare, the government implements a system of penalties that depends on product characteristics and on the firm's relative ability to control quality. This legal system emphasizes reliable advice over transaction pace. Furthermore, the implicit team structure of the firm and its intermediary prevents self-regulation from achieving the same social efficiency. (JEL G18, G28, D11, D18, L51, K20)

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