Recurring food price shocks, geo-political flash points pose challenges in tackling inflation: RBI Governor

The Reserve Bank of India (RBI) Governor Shaktikanta Das has said recurring food price shocks and renewed flash points on the geo-political front pose challenges in tackling inflation. He said ‘We remain vigilant to navigate through the last mile of disinflation as it is often the most difficult part of the journey. We firmly recognise that stable and low inflation will provide the necessary bedrock for sustainable economic growth’. Das stressed that stable and low inflation will provide the necessary bedrock for sustainable economic growth. He added India has successfully navigated through multiple challenges and emerged as the fastest-growing large economy.

He further said ‘Prudent monetary and fiscal policies have paved the path for India’s success in sailing through these rough waters. The Reserve Bank projects the Indian economy to grow by 7.0 per cent during 2024-25, marking the fourth successive year of growth at or above 7 per cent’. Das also said inflation has moderated from the highs of the summer of 2022. The retail inflation, which the RBI mainly factors in while arriving at its bi-monthly monetary policy, is inching towards its target of 4 per cent, with the January imprint at 5.1 per cent.

He highlighted that recurring food price shocks and renewed flash points on the geo-political front pose challenges to the ongoing disinflation process. He noted India’s coordinated policy response in the face of a series of adverse shocks can be a good template for the future. While monetary policy worked on anchoring inflation expectations and quelling demand-pull pressures, supply-side interventions by the government alleviated supply-side pressures and moderated cost-push inflation. Effective fiscal-monetary coordination was at the core of India’s success.

The governor said the global economy stands at a crossroads, and challenges remain in plenty, but new opportunities are also knocking at the door. He said ‘Together, the course we take from here will decide our destiny in times to come. We need policies that are attuned to the new realities of the global economy. In an uncertain world, central banks need to be proactive to better serve the objectives of price and financial stability’. He noted that prospects of a soft landing have improved for the global economy, but there are multiple challenges with uncertainties looming on the horizon.