Headline inflation remains vulnerable to recurring and overlapping shocks due to overseas plus domestic factors, said Reserves Bank of India’s Governor Shaktikanta Das on Wednesday at the inaugural address at FIBAC 2023.
Household price rise expectations are becoming anchored but headline inflation remains vulnerable, said Das in his address.
“RBI’s MPC actions, including prioritising inflation ahead of growth and narrowing LAF corridor, have facilitated significant softening of headline inflation,” he said. Das said moderation in core inflation is “noteworthy.”
The RBI Governor said monetary policy needs to remain watchful and disinflationary while supporting growth.
RBI Guv said financial stability is the backbone for any country’s growth. “Price stability also impacts a variety of factors, including financial stability and both are essential.”
Indian Rupee has exhibited low volatility despite elevated US treasury yield and strong USD, Das said further.
Movement in INR are consistent with the strength of underlying macro fundamentals of Indian economy and the reassuring availability of buffers, i.e. forex reserves, said Das.
“We have moved from twin balance sheet threats to an era of twin balance sheet advantage. Improved health of banks and corporates was reflected in Q2 earnings numbers,” said the RBI Governor.
“As a nation we must find ways to carry out certain reforms, particularly in the farm sector,” he said.
Credit growth is accelerating, banks and NBFCs need to take due care to ensure that credit growth remains sustainable, all forms of exuberance needs to be avoided, Das said.
“Given the increasing importance of NBFCs, the increasing interconnectivity between banks and non-banks merits close attention. NBFCs are large net borrowers of funds with exposure from banks being the highest. Such concentrated linkages may create contagion risks.”
Retail inflation in India eased to 4.87 per cent in October on an annual basis, data released by the Ministry of Statistics & Programme Implementation showed earlier this month.
Inflation rate in urban and rural areas stood at 4.62 per cent and 5.12 per cent, down from 6.50 per cent and 6.98 per cent seen in the same month a year ago.
After a rise in July and August, volatile food prices—which account for about half of the consumer price index (CPI) basket—moderated. The rate of inflation in the Consumer Food Price Index (CFPI) stood at 6.61 per cent in October, against 6.62 per cent in September and 7.01 per cent in October 2022.
