New Delhi: Inflation is expected to moderate during the year, RBI’s Monetary Policy Committee (MPC) member Ashima Goyal said on Sunday, adding that the government’s supply-side approach, coupled with a flexible inflation targeting regime, has kept price growth low. in other countries. Goyal said that India has successfully dealt with “pluri-shocks” in the last three years and has shown considerable resilience.\
“Inflation rates are expected to moderate during the year. The government’s supply-side actions, coupled with a flexible inflation targeting regime, have kept India’s inflation rate lower than other countries and below our historical averages, even during periods of major adverse external supply shocks,” he told PTI in a phone interview. said. (Also Read: Latest FD Rates 2023: HDFC vs ICICI vs Axis Bank Fixed Deposit Rates Compared)
He was asked whether high inflation has become the norm in India. “As nominal policy rates rise with inflation to maintain the positive real rate expected under inflation targeting, this prevents demand from overheating and anchors inflationary expectations,” he said. (Also Read: Biryani ATM: Chennai-based startup launches India’s first Biryani take-out point)
Goyal said policy rates had fallen sharply during the pandemic, so they had to be raised quickly once the recovery was established. “However, policy rates should not be raised too high at present due to the slowdown in external demand. It is necessary to provide an opportunity to replace the domestic demand,” he said.
Goyal said the RBI will not tighten excessively until the real policy rate is expected to rise above unity in the future. The Reserve Bank of India (RBI) has raised its benchmark repo rate by 250 basis points since May last year, expecting to raise it by another 25 basis points to 6.75 percent in April before pausing until the end of the year.
RBI has lowered its consumer price inflation (CPI) forecast to 6.5 percent from 6.7 percent for the current fiscal. India’s retail inflation stood at 6.52 percent in January.
Asked what impact the hot weather could have on the wheat crop and food inflation, Goyal said weather patterns have become erratic, so there is a need to build stability in agriculture, for example through different cropping patterns and firmer planting. crops.
This may already be happening, he believes, given the good autumn vegetable crops despite prolonged rains. Goyal noted that the international price of wheat has also decreased.
Responding to a question about India’s current macroeconomic situation, he said the country has successfully dealt with “pluri-shocks” in the past three years and has shown considerable resilience. “The four principles that have worked for India are the BCCR: balance, countercyclical smoothing, coordination and reform,” he said.
Goyal said the key to India’s success is sustainable structural reforms that balance supply and demand appropriately, countercyclical policies that smooth out external shocks, and better coordination between monetary and fiscal policies.