Inflation may ease from second half of fiscal, says RBI Governor

RBI Governor Shaktikanta Das mentions a need for enhanced policy coordination and dialogue among countries to achieve better outcomes.

OpEd Desk July 10, 2022

Inflation:

Retail inflation will likely ease gradually in the second half of this fiscal, “precluding the chances of a hard landing” or recession, Reserve Bank of India (RBI) governor Shaktikanta Das said on Saturday.

Inflation is a measure of the trust and confidence that the public reposes in the economic institutions of the country, Das said while speaking at the inaugural Kautilya Economic Conclave.

“Our endeavour has been to ensure a soft landing (a moderation in inflation closer to targets with only a moderate slowdown in output growth),” Das said, indicating that cooling price pressure may reduce the need for aggressive monetary action.

“Overall, at this point of time, with the supply outlook appearing favourable and several high frequency indicators pointing to resilience of the recovery in the first quarter (April-June) of 2022-23, our current assessment is that inflation may ease gradually in the second half of 2022-23, precluding the chances of a hard landing in India,” the Governor said.

Das noted that the Monetary Policy Committee (MPC) in its April and June meetings revised the projection of inflation for 2022-23 in two stages to 6.7 per cent, taking stock of the evolving developments and with inflation pressures getting generalised.

About three-fourths of the revision in June was on account of geopolitical spillovers to food prices, he said, adding the MPC also decided to increase the policy repo rate by 40 bps and 50 bps in May and June, respectively.

This was on top of the 40 basis points (bps) effective rate hike through the introduction of the Standing Deposit Facility (SDF) at 3.75 per cent.

During this period (April to June 2022), the MPC also changed its stance to withdrawal of accommodation.

These recent developments “call for greater recognition of global factors in domestic inflation dynamics and macroeconomic developments, which underscore the need for enhanced policy coordination and dialogue among countries to achieve better outcomes”, Das said.

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