In view of the high level of financial exclusion in this sector (93%), the drive to universal financial access, including SME finance, is no longer a policy choice, but a compulsion. The Reserve Bank of India has intensified a number of measures and endorsed quantitative access targets over the last few years to further financial inclusion.
Moreover, underlying inflation has increased from the very low levels observed in 2016 and is expected to rise amid an expanding economy, high levels of capacity utilisation and labour market tightening. Stronger underlying inflation pressures, in turn, should pass through to headline inflation.