India’s inflation to cool gradually, central bank chief says

INDIA’S disinflation process is “likely to be slow and protracted” and the central bank may meet its 4 per cent target only in the medium term, Reserve Bank of India (RBI) governor Shaktikanta Das said on Tuesday (Jun 13).

“The cumulative impact of our monetary policy actions over the last one year is still unfolding and yet to materialise fully,” governor Das said at an event by Central Banking magazine in London, adding that RBI’s price-gains forecast of 5.1 per cent for the current financial year is well above its aim.

Last week, India’s rate-setters kept the benchmark repo rate unchanged for a second straight meeting, reiterating the need to align inflation near the mid-point of its 2 per cent-6 per cent range on a durable basis.

Das said the MPC eschewed from providing any future guidance on the timing and level of the terminal rate as guidance in a rate tightening cycle was “fraught with risks.”

India’s central bank expects the nation to grow 6.5 per cent in the current fiscal year. The government’s continued thrust on capital expenditure is creating additional capacity and triggering private investment, Das said. Robust domestic demand, especially private consumption and investment, boosted the economy, he added. BLOOMBERG