Demand matters, not just supplies.

"Reserve Bank of India (RBI) yesterday kept the policy rate unchanged for the 11th consecutive time at 6.5%, cut the economic growth forecast to 6.6% for 2024-25 from the earlier 7.2%, and reduced the cash reserve ratio (CRR) by 50 basis points to 4% which is expected to release nearly Rs 1.6 trillion for banks and help moderate lending rates." "The RBI also raised the inflation projection for FY25 to 4.8% from 4.5%." TOI. "At its core the cash reserve ratio represents a part of a bank's total deposits held back in reserve." "Banks cannot use these reserves to invest or lend to customers, marking it as an essential safeguard." kotak.com. CRR protects the bank from default in case of a sudden demand from customers and also helps the RBI to indirectly control the lending rate by controlling the amount of cash. Banks also have to maintain a Statutory Liquidity Ratio (SLR) which is "the minimum percentage of deposits that the commercial bank maintains through gold, cash and other securities." The present rate of SLR is 18%. cleartax. According to the National Statistics Office, growth of the real GDP in the second quarter of financial year 2024-25 is estimated at 5.4%. pib.gov.in. RBI Governor Shaktikanta Das said that "high frequency indicators available so far suggest that the slowdown in domestic economic activity bottomed out in the second quarter of this year and it has since recovered aided by strong festive demand and pickup in rural activities." The slowdown mainly due to "deceleration in industrial growth from 7.4% in the first quarter to 2.1% in the second quarter." ET. The consumer price index (CPI) inflation was 6.21% in October while food price inflation (CFPI) was at 10.87%. mospi.gov.in. Das said that "The RBI has revised its retail inflation forecast for FY25 to 4.8%, up from the earlier projection of 4.5%," because food prices will start coming down in the fourth quarter. Vegetable prices will ease but edible oil prices could remain high. ET. "Demand for goods is likely to remain subdued next year, as high inflation hurts real incomes, eroding consumer confidence, market research firm Kantar said in its outlook for 2025." "The urban middle class, once the cornerstone of the consumer goods market, has become the smallest cohort. Real incomes have been under pressure, leading to stagnating consumer confidence." Mint. Since food prices are volatile and depend on supplies, the Economic Survey 2024 suggested that the RBI should ignore food prices when setting its policy rate. The Hindu. Core CPI is the price of goods and services excluding food and fuel. Investopedia. In the 154 months since 2014, core CPI inflation was above 5% in 57% of the months, while food inflation was above 5% in 62% of the months and below 4% in 29% of the months. "Hence, targeting core inflation could result in similar responses from the MPC." Since consumption habits of Indians have changed, the basket of articles constituting household consumption should be updated, wrote Madan Sabnavis. Perhaps, all the people blaming supplies for causing inflation are forgetting that India's population is projected to peak at 1.701 billion by 2062 (BS), which means demand rising by another 300 million. Perhaps, they just want to please the government. After all, "In the long run we are all dead." (John Maynard Keynes). Cynical. Or toadies.