Inflation won't affect RBI projections, says Gokarn

The decline in industrial output in September and the marginal rise in inflation in October would not affect the Reserve Bank of India's (RBI) projections for the year, Deputy Governor Subir Gokarn said on Monday.

“We haven't seen anything that might suggest we need to revise that guidance...So, the guidance still stands, based on both the growth number and the inflation number…The Index of Industrial Production (IIP) growth was at the lower end of the possible range. It doesn't have an impact on the projection for the year as a whole,” Gokarn said.

The RBI deputy governor said the inflation trajectory was in line with expectations and that the October policy guidance by RBI still held. He said the stance the central bank had factored in deceleration.

In its October 25 mid-quarter review of monetary policy, RBI had hinted it may take a pause, provided inflation started easing from December.

“How it plays out later on, particularly on dynamics of inflation, will clearly have an influence beyond the quarter. But for now, what we have said for December, and possibly for January, I don't think has been impacted,” Gokarn said.

Wholesale price index-based inflation in October stood at 9.73 percent, marginally up from 9.72 per cent in September, as prices of food items rose. In September, IIP growth fell to a two-year low of 1.9 per cent, primarily due to poor manufacturing sector output.

“If you look at our month-by-month projection in our policy statement, it's very close to what we expected, both the headline and the core inflation. So, in that sense, the trajectory seems to be holding up,” Gokarn said, adding the interest rate cycle may have peaked.