RBI chief Shaktikanta Das says inflation has moderated, but there is no room for complacency

Inflation has moderated, but the central bank cannot just ease price pressures yet as potential weather-related uncertainties linger, the governor of the Reserve Bank of India said on Wednesday.

“The war on inflation is not over, we must remain vigilant,” Shaktikanta Das said at an event in New Delhi.

“There is no room for complacency. We will have to see how the El Nino factor plays out.”

India’s annual retail inflation fell to 4.7% in April from 5.66% the previous month, the data showed.

This month’s retail inflation data, due out June 12, “could possibly be lower,” Das said.

The RBI targets inflation at 4%, with a tolerance level of up to two percent on either side.

The monetary policy committee responsible for setting rates has raised the policy rate by 250 basis points since May last year to ease inflationary pressures. The panel kept the repo rate steady at its meeting last month and is expected to take another break at its meeting in June.

Besides posing upside risks to inflation, El Nino could also weigh on India’s economic growth, Das said. Geopolitical uncertainties, lower trade in goods due to a contraction in global trade could also add to downside risks to growth, he said.

Despite these factors, India’s gross domestic product growth could be above 7% for 2022-23, and such an outcome, if materialized, should come as no surprise, the governor said.

India is expected to record GDP growth of nearly 6.5% in 2023-24, he said, adding that capital spending is picking up in the private sector, while government infrastructure spending are also on the rise.

The RBI will endeavor to remain prudent and act in time to ensure financial stability, remaining proactive in foreign exchange management, and will continue to focus on the stability of the rupee, Das said.