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Former Reserve Bank of India (RBI) governor Raghuram Rajan has said that India needs to recalibrate its response to the price situation following disruptions in global supply chains on account of Russia-Ukraine war, as losing the battle against inflation neither serves the government nor the central bank. Further, he said it is very important for any central bank to respect its mandate given to it by the government.

He stated India’s central bank has a mandate, which has served it well, in the sense of allowing it to react to some of the concerns during the pandemic, without raising rates, having moderate inflation. The RBI has a mandate to keep inflation target of 4 per cent with a +/-2 per cent tolerance band. ‘And like every other central bank, as we come out of it and face new challenges, we have to recalibrate and ask whether the old playbook sort of still holds,’ he said, adding that he thinks that’s extremely important.

The retail inflation rate breached the 6 per cent upper tolerance limit of the RBI for the first time in seven months in January, while the wholesale-price index stayed in double-digits for the 10th month in a row. He said this (inflation) is coming on top of an already high level of inflation in many parts of the world. He added 'So when you add the additional effects of war, it gives greater weight to inflation'.