Inflation may ease during second half of financial year, says RBI Governor Shaktikanta Das
The price rise has stayed above the Reserve Bank of India’s 6% upper tolerance level in 2022.
Inflation in India could improve in the second half of this financial year, Reserve Bank of India Governor Shaktikanta Das said on Saturday, PTI reported.
The assessment was made on the basis of a favourable supply outlook and good indicators of economic recovery in the first quarter (April-June) of 2022-’23, he said while speaking at an economic conclave in Delhi.
The easing inflation may prevent a hard landing, he added. A hard landing refers to a marked economic slowdown or downturn following a period of rapid growth.
Central banks around the world are facing inflation caused by disruptions in supply chains, surging commodity prices, and the fallout from the Russian invasion of Ukraine.
In India, inflation has stayed above the Reserve Bank of India’s 6% upper tolerance level in 2022 with the price-rise indicator touching an eight-year high of 7.79% in April.
Das on Saturday said that while factors beyond control may affect inflation in the short run, the medium-term trajectory is determined by monetary policy, PTI reported.
“Therefore, monetary policy must take timely actions to anchor inflation and inflation expectations so as to place the economy on a strong and sustainable growth pedestal,” he said.
In May, the Reserve Bank of India’s monetary policy committee raised the repo rate by 40 basis points to 4.40% with immediate effect due to inflationary pressures.
The Repo rate is the interest rate at which the central bank lends to commercial banks. This was the first-rate hike since August 2018, PTI reported. The move raised borrowing costs for corporates and individuals.
At the conclave, Das said that the benefits of globalisation come with certain risks and challenges.
Shocks to prices of food, energy, commodities and critical inputs are transmitted across the world through complex supply chains, he added.
There is a need for greater recognition of global factors in domestic inflation dynamics and macroeconomic developments that can be achieved through the need for enhanced policy coordination and dialogue among countries, the governor said.