When things are going so well, shouldn't the RBI worry?

"A retail inflation level of above 6% has already begun to worry markets but is yet to show a visible concern from the Reserve Bank of India (RBI)," wrote Aparna Iyer. That is because the formal economy has done well but, "Economic shocks have hit the informal sector disproportionately due to the low or the lack of financial buffer." "The key driver of the increase in headline retail inflation is government taxes on fuel, and the rest is largely imported inflation due to a sharp rise in global commodity prices." With high unemployment workers are in no position to bargain for higher wages so the RBI is not worried about retail inflation transforming into wage inflation. "India's jobless rate fell to the lowest level in four months in July," as "The unemployment rate dropped to 6.95% last month from 9.17% the previous month, according to the latest data from private research firm Centre for Monitoring Indian Economy (CMIE)," Times of India (TOI). "From groceries to refrigerators, smartphones and cars, sales of essential goods and discretionary products bounced back sharply last month, with several manufacturers reporting their best-ever July numbers this year," Economic Times (ET). "Sales of most categories increased 20 to 50% from a year earlier." "Women professionals, especially those in the IT sector, may never have had it so good, with diversity hiring being the highlight of the season. Not only is there a scramble to bring talent on board -- with emphasis on immediate joining -- a significant number of hires are women, with companies offering them up to 70% jump over their last drawn package," ET. "India's merchandise export in July 2021 rose to $35.17 billion, higher by 47.91 percent on a year-on-year basis, preliminary official data showed on Monday," Zee Business. "Exports during April-July 2021 were $130.56 billion, up by 73.86 percent over the same period of 2020 ($75.10 billion)." "India's services exports increased 24.1 percent month-on-month to USD 19.72 billion in June 2021, the RBI said on Monday," ET. "India Inc's capex (capital expenditure, investopedia) cycle peaked in 2011, and since then, it has been a decade-long wait for its revival," wrote Aruna Giri. This could be changing. There has been "An outlay of $15 billion by top steel companies," "$5 billion by leading cement companies", "Over $15 billion commitments in new projects by oil & gas companies", "$10 billion investments in the power and coal", and $5 billion outlay in the non-ferrous sector". "Factory activity in the country bounced back in July as demand surged both at home and abroad, prompting companies to create new jobs for the first time since the onset of the pandemic", as "The Manufacturing Purchasing Managers' Index (PMI), compiled by IHS Markit, jumped to 55.3 last month from 48.1 in June," NDTV. "The output of eight core sectors grew 8.9 percent in June, mainly due to a low base effect and uptick in production of natural gas, steel, coal and electricity, official data showed," Business Standard. "The government collected Rs 1,16,393 crore (Rs 1.16 trillion) GST revenue for the month of July after it dropped below the Rs 1 lakh crore mark in June," ET. With marked increases in so many indicators, such as exports, sale of consumer goods, PMI, employment, new investments and GST collection, why is the RBI unworried about inflation. "Across the world, supply versus demand mismatches are fuelling inflationary pressure, In such circumstances, contrary to the popular notion of high-quality stocks taking a beating, history shows that such companies have outperformed the broader market even more strongly (when CPI inflation exceeds 6%) on revenue growth, profit margins and shareholder returns," wrote Saurabh Mukherjea. "Equity investors have witnessed a wealth addition of more than Rs 31 lakh crore (Rs 31 trillion) in the first four months of the current fiscal, helped by an overall bullish sentiment in the market," ET. Inflation, or rising prices, means the rupee is buying less everyday. We know the rupee has weakened against the dollar from 3.3 in 1947 to around 74 today, 75 years after independence, Thomas Cook. A real fall will make imports expensive and add real zest to inflation. As long as the RBI is ready to take the blame. Fall on its sword.