Given that inflationary pressures are easing, the Reserve Bank of India (RBI) will devote all of its efforts to reviving the country’s economic growth, according to Michael Patra, deputy governor of the central bank.
The RBI deputy governor stated during a panel discussion of central banks at the Asia Economic Dialogue, “Our sense is that headline inflation peaked in January and will now ease down to the target of 4% by the fourth quarter of 2022.”
“And this has given us the space to keep policy rates low and maintain an accommodating stance so that we can focus all of our efforts on speeding up and broadening the restoration,” Patra added.
Consumer prices in India rose 6.01 percent last month, compared to a revised 5.66 percent the previous month, bolstered by rising food, fuel, and household item prices. However, the RBI’s monetary policy committee (MPC) maintained the benchmark repo rate at 4.0 percent, maintaining its accommodative policy stance to aid the economy’s recovery from the pandemic.
RBI Governor Shaktikanta Das previously stated that the increase in inflation was primarily due to statistical explanations, particularly in the third quarter of FY22, and that the same base effect will play out in different ways in the coming months. At 12.96 percent, wholesale inflation remained in the double digits.
Several quarters, including economists, have chastised the RBI for failing to unwind its extraordinary monetary stimulus despite inflation creeping up towards the 2-6% target.
The RBI deputy governor stated that he believes the central bank is behind the curve in withdrawing monetary policy stimulus, and that despite India experiencing the worst growth contractions globally in the early stages of the pandemic, guidance for economic recovery is still warranted.
Patra went on to say that the RBI has the capacity to support growth and that it will do so. He also stated that the country’s monetary policy would most likely differ from that of the rest of the world in the future and that the RBI would play a role in this.