India's retail inflation stands at 5%, a significant drop from previous levels due largely to a correction in vegetable prices in September 2023. This decline has sparked discussions within the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) about the speed of inflation control, stated Jayanth R Varma, a member of the MPC, while urging patience in reaching the inflation target of 4% to avoid causing a shock to economic growth.
During its October meeting, the MPC maintained the repo rate at 6.5% and committed to a "withdrawal of accommodation" stance. RBI Governor Shaktikanta Das insisted that monetary policy must remain disinflationary for a smooth ongoing disinflation process. He clarified during the bi-monthly monetary policy announcement that the inflation target is 4%, not within the wider range of 2% to 6%, and emphasized aligning inflation with this target while supporting growth.
Varma has suggested that a reduction in the repo rate doesn't need to wait for the 4% inflation target, emphasizing a forward-looking monetary policy. He acknowledges potential risks to the global economy from ongoing conflicts in the Middle East but finds comfort in stable oil prices amidst these conflicts, attributing this stability to depressed global demand.
At the Kautilya Economic Conclave, Das highlighted the complementary nature of price stability and financial stability, emphasizing non-negotiable financial stability while maintaining price stability and growth objectives. The RBI projects headline retail inflation at 5.4% for 2023-24. A survey conducted in September 2023 indicated progress in anchoring single-digit inflation expectations for the first time since the COVID-19 pandemic.
Despite differing views on withdrawal of accommodation or loose monetary policy with more liquidity, Das doesn't foresee any growth issues for India. Citing India's economic resilience due to strong domestic demand, he forecasts a real GDP growth rate of 6.5% for 2023-24, positioning India as a future global growth engine.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.