India vulnerable to recurring food price shocks, says RBI Governor Das

Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday said India remains vulnerable to “recurring and overlapping” food price shocks despite the recent moderation in inflation.

In these circumstances, monetary policy remains watchful and actively disinflationary to progressively align inflation to the target, while supporting growth, Das said at a symposium on the Indian economy organised by the Institute of Indian Economic Studies in Tokyo in Japan.

The Consumer Price Index-based retail inflation eased to a three-month low of 5.02 per cent in September on the back of softer vegetable prices, but remained above the RBI’s 4 per cent target. The retail inflation was 6.83 per cent in August.

The RBI’s rate-setting panel has raised the repo rate by 250 basis points cumulatively between May 2022 and February 2023 to manage inflation expectations. The central bank has kept the key rate unchanged over the last four meetings. The panel has projected inflation to average at 5.4 per cent in 2023-24, a moderation from 6.7 per cent in 2022-23.

Thanks to a confluence of factors, including to a large extent the steps taken by the RBI, the Indian economy has emerged as an epitome of stability and opportunity, Das said. “We have not only kept our house in order against large and overlapping global shocks, but also improved our macroeconomic fundamentals and buffers.”

While growth remains on track, inflation is on a path of moderation, though it is still above the target. The balance sheets of banks and corporates are healthiest in a long time and with the government’s push for public investment, they create favourable conditions for a sustained revival in investment, he said. 

Consumer confidence, as evident from RBI surveys, was on a rising trajectory since the pandemic lows. “Indi­a’s external sector inspires confidence as we are reaping export opp­o­r­tunities in the services sector; our current account deficit remains emi­nently manageable; and we have bolstered our for­ex reser­ves to deal with pote­­­ntial eventualities,” Das said.