News
There is no room for adventurism: Das – Banking and Financial News
The last mile of disinflation in India is proving particularly “sticky, arduous and very slow”, and the Reserve Bank of India (RBI) must focus on meeting the 4% retail inflation target rather than engage in any form of “adventurism”. ,” Governor Shaktikanta Das said today.
“At this time, we should avoid any form of adventurism, it is better to stay the course and be alert and play ball by ball,” Das said at an ET Now event, adding that any erratic weather event could lead to a rise in vegetable prices , thus leading to an increase in food inflation.
O RBIThe country’s six-member Monetary Policy Committee (MPC) on June 7 kept the repo policy benchmark rate at 6.5%. However, unlike previous times, two MPC members—Ashima Goyal and Jayant Varma – voted to change the MPC’s stance from “withdrawal of accommodation” to “neutral”. Until April, Varma was the only MPC member to vote for a change of position.
Das said food inflation remains high and over the last 6-7 months, average food inflation stood at around 8%, while underlying inflation moderated substantially and reached 3% in May, an all-time low. Food inflation is high mainly due to supply-side factors, which are affected by weather conditions. Last summer’s extreme heatwave affected legume cultivation and vegetable production.
Simultaneously, international metal prices started rising late and taking into account all these factors, the RBI has predicted that in FY25, average inflation will be 4.5%.
Das said he is confident of gross domestic product growth at 7.2% in the current fiscal year due to strong macroeconomic conditions, recovery in rural demand, stable corporate balance sheet and expectations of higher government and private sector spending in the infrastructure sector.
“On the consumption side, rural demand, which had been lagging since Covid-19, and perhaps also in the first half of last year, is starting to improve in a very visible way. Rural consumption increased, FMCG sales in rural areas have increased, demand for MGNREGS has decreased, the agricultural season looks optimistic due to the projection of above normal monsoon in the southeast region,” he said.
Demand from the external sector is also expected to remain strong, supporting domestic exports, particularly in the services sector. Even in the services sector, unlike previous times, when demand was mainly concentrated in the IT segment, more recent segments, such as accounting and legal, now have higher demand.
Indiathe current account deficit remained very low at 1.2% in the 9MFY24 period and Das said he would not be surprised if the full year CAD was less than 1%.