The Reserve Bank of India (RBI) Governor Shaktikanta Das on Saturday said that the headline inflation number for October is expected to be lower than 7%. The Ministry of Statistics and Programme Implementation (MOSPI) is scheduled to release CPI inflation data for October on Monday (November 14).
“We have a major challenge with regard to inflation…The last inflation number which was released for September inflation of 7.4%. We expect the optimal number which was released on Monday, we expect that to be lower than 7% so, therefore, inflation is is a you know is a matter of concern, which which we have now released and dealing effectively,” Das said while speaking at an event.
The CPI inflation has remained above 7% for two consecutive months, after dipping to 6.7% in July. The consumer inflation rose to 7.4% in September from 7% in the previous month. While the steps taken by the RBI
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Das also said that the central bank is committed in bringing down the inflation within the tolerance band over a period of time and it does not make sense to shift the goalpost on inflation just because the apex bank has not been able to meet it.
“Is it the time to change the the whole regime? I would say that 2-6%, with 4% as the main target. It makes a lot of economic sense. And we should not think of shifting the goalposts because you know, because we have not been able to meet it,” Das said while speaking at an event.
There is a debate internationally that the interest rates might remain on the higher side for a long time, but as far as India is concerned, the RBI remains committed to the 4% target, which gives the central bank enough legroom to maneuver in a crisis situation, he said.
The internal committee of the RBI had earlier observed that inflation above 6% for India will be detrimental and counterproductive to growth. At higher inflation levels, financial markets, savings and reduce the flow of foreign funds to the country, he said.
Das’ comments also come at the time when the Monetary Policy Committee (MPC) held an additional meeting to discuss the report to be send to the government for not maintaining the inflation within the prescribed limits for three quarters in a row. The unexpected Ukraine conflict had put pressure on supply chains and also sent crude oil prices in an upward spiral, leading to massive shift in inflation scenario. These are the reasons mentioned in the report explaining as to why the central bank could not adhere to the inflation target, Das said.
On growth of the economy, Das has pegged the GDP to grow by 7% in the current financial year, as mentioned in the latest Monetary Policy Committee (MPC) meeting.
“European Union is today facing a recession situation…but there are possibilities that they will avoid it. The United States is holding stable, but there are other countries also where the growth has slowed down. So far as India is concerned, economic overall macroeconomic fundamentals, the financial sector stability, all these aspects remain resilient,” Das said while speaking at an event.
Ratings agency Moody’s on Friday slashed India’s GDP growth to slow to 7% in 2022 compared to its earlier projection of 7.7%. The agency had pegged growth of 4.8% in 2023 and 6.4% in 2024. global financial agency International Monetary Fund (IMF) had also reduced India’s growth forecast to 6.8% from 7.4%.
While defending the RBI’s intervention in the currency market, Das said that it is incorrect to say that the central bank has used the foreign exchange reserves indiscriminately.
India’s foreign exchange reserves fell by $1.1 billion in the week ended November 4 led by decline in gold reserves to $529.9 billion, as per latest RBI data.
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“We picked up these reserves only for this rainy day. And when it rains, I have said it earlier also you have to pick up your umbrella and use it,” he said.
On autonomy of the RBI, Das said that there has to be proper coordination between the monetary authorities, and coordination does not mean compromise of autonomy.
“Nobody interferes in each other’s work, but we share our views,” Das said.