The governor of the Reserve Bank of India said on Wednesday that although India’s inflation has eased, the country’s central bank cannot yet become comfortable about lessening pricing pressures because potential weather-related concerns still exist.
At a gathering in New Delhi, Shaktikanta Das declared, ‘The war on inflation is not over; we have to remain vigilant.’ No room exists for complacency. We must wait and observe how the El Nino effect develops.
According to data, India’s annual retail inflation decreased from 5.66% in March to 4.7% in April. The retail inflation statistics for this month, which will be made public on June 12, ‘could possibly be lower,’ according to Das.
With a tolerance margin extending up to two percentage points on either side, the RBI sets an inflation objective of 4%.
Since May of last year, the Monetary Policy Committee, which sets interest rates, has increased the policy repo rate by 250 basis points to combat inflationary pressures. At its meeting last month, the panel maintained the repo rate, and it is anticipated that it will do so once more in June.
El Nino not only presents upside risks to prices but might also hinder India’s economic expansion, according to Das. He added that additional downside risks to growth could come from geopolitical uncertainty and decreased merchandise trade as a result of a decline in international commerce.
The governor stated that despite these factors, India’s gross domestic product growth for 2022–23 might be above 7%, and if this result materialises, it shouldn’t be unexpected.
According to him, India’s GDP is projected to grow by close to 6.5% between 2023 and 2024. He also noted that government and private sector spending on infrastructure is both increasing.
According to Das, the RBI will continue to put emphasis on rupee stability while trying to maintain caution and take prompt action to safeguard financial stability.
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