Inflation below 5% but certain challenges still remain: RBI Governor Shaktikanta Das

Reserve Bank of India (RBI) Governor Shaktikanta Das said that while inflation has been brought down to below 5 per cent due to government and the central bank’s measures, there are still global and certain local challenges. 

“The steps that we (RBI) took and the supply side measures that the government took led inflation to lower below 5 per cent –the latest if 4.25 per cent. If I have to summarise – prices increased because of the global commodity prices as well as local factors such as untimely or unseasonal rains, leading to rise in vegetable prices. Even amid so much uncertainty, we took certain measures and increased the interest rates in a calibrated manner. Government also ensured certain supply-side measures,” he said in an interview with news agency PTI.

The governor, during the Monetary Policy Committee announcements earlier this month, had lowered the inflation forecast for FY24 from 5.2 per cent to 5.1 per cent. For the first quarter, inflation was projected at 4.6 per cent, 5.2 per cent for the second quarter, 5.4 per cent for the third quarter and 5.2 per cent for the fourth quarter, which is a slight tweak from the earlier projection of 5.1 per cent, 5.4 per cent, 5.4 per cent and 5.2 per cent in the four quarters respectively. 

Also read: RBI cuts inflation projection for FY24 to 5.1%

Governor Das, in his interview, also acknowledged that there are certain challenges that still remain.  

“One is international uncertainty because of the war or geopolitical tensions. This is still ongoing and the outcome and the fallout will be clearer in the future. The other challenge is the El Nino prediction, even though there is a normal monsoon prediction. It will have to be kept in mind how severe El Nino gets. Third is weather related events whose impact is felt acutely on vegetable prices. We will have to deal with these uncertainties,” he said. 

In the MPC announcements, the governor had said a close and continued vigil on the evolving inflation is absolutely necessary, especially as the monsoon outlook and the impact of El Nino remain uncertain. 

He added that while consumer and business outlook surveys display continued optimism, headwinds from weak external demand, volatility in global financial markets, protracted geopolitical tensions and intensity of El Nino impact, pose risks to the outlook.

Governor Das had said that the forecast of a normal Southwest Monsoon by the India Meteorological Department (IMD) augurs well for the kharif crops but other factors including the interplay between El Nino and the Indian Ocean Dipole (IOD) pose risks of uncertainties. 

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