In order to achieve strong and sustainable growth, the central bank will continue to take monetary measures to anchor inflation, RBI Governor Shaktikanta Das said on Saturday. He exuded confidence that the price situation will gradually improve in the second half of the current fiscal.
Speaking at the first Kautilya Economic Conclave, Das stated that inflation is a gauge of the public’s confidence in the nation’s economic institutions.
The Governor stated, “Overall, at this point in time, the supply outlook appears favorable and several high frequency indicators point to resilience of the recovery in the first quarter (April-June) of 2022–23. Our current assessment is that inflation may ease gradually in the second half of 2022–23, excluding the chances of a hard landing in India.
He said the central bank will take steps to preserve and promote macroeconomic stability, noting that maintaining price stability is essential to maintaining macroeconomic and financial stability.
“While factors outside of our control may have an impact on inflation in the short term, monetary policy determines its trajectory over the medium term. To put the economy on a solid and sustainable growth foundation, monetary policy must act promptly to anchor inflation and inflation expectations.
He declared, “We will keep adjusting our policies with the overarching goal of maintaining and promoting macroeconomic stability.
Das noted that the Monetary Policy Committee (MPC), taking into account the changing developments and the generalization of inflation pressures, revised the projection of inflation for 2022–23 in two stages to 6.7% at its meetings in April and June.
According to him, geopolitical effects on food prices accounted for about three-fourths of the revision in June. He also noted that the MPC decided to raise the policy repo rate by 40 bps and 50 bps in May and June, respectively.
This was in addition to the Standing Deposit Facility (SDF) at 3.75 percent, which resulted in an effective rate increase of 40 basis points (bps).
During this time (April to June 2022), the MPC also switched its position from accommodation to withdrawal.
When discussing the prospects for global growth, Das stated that there are significant downside risks in the near term due to the sharply tightening financial conditions brought on by the ongoing normalization of monetary policy and the persistent geopolitical tensions.
According to him, they are also causing stagflation worries and even talk of recession in some regions of the world.
Das noted that the advantages of globalization come with some risks and difficulties, and that shocks to the prices of food, energy, commodities, and essential inputs spread throughout the world via intricate supply chains.
In fact, he claimed that recent events highlight the need for improved policy coordination and communication among nations in order to achieve better results, calling for a greater recognition of global factors in domestic inflation dynamics and macroeconomic developments.
