Expanding supply capacity to contain inflationary pressure, RBI's inflation target credible: S&P Global Ratings

14 Nov 2024 Evaluate

S&P Global Ratings has said supply capacity in India is continuing to expand pretty quickly which will help contain inflationary pressure. S&P Senior Economist Asia Pacific Vishrut Rana said the central bank's monetary policy and inflation target remains credible and the Reserve Bank of India (RBI) should be able to anchor inflationary expectations. He said 'That remains a manageable challenge.'

India's retail inflation soared to a 14-month high of 6.21 per cent in October -- above the RBI's tolerance band, mainly on account of rising food prices. It was 5.49 per cent in September. The RBI, which is mandated by the government to contain inflation at 4 per cent (+/- 2 per cent) has projected retail inflation to be 4.5 per cent in the current fiscal year.

Rana said ‘For policymakers and households to balance (consumption and sustainable growth) is to making sure that everyone spends within the means and that can increase savings.’ He said consumption is a major component for the Indian economy, with private consumption accounting for more than 55 per cent of the overall growth.

He added ‘We do see a strong consumption-driven growth outlook for economy. Overall, infrastructure is another component of growth. Urban consumption has been the key driver of growth over the past couple of years.’ Indian economy is very heavily domestically oriented, he said, adding that about 85 per cent of the Indian economy relies on domestic demand, meaning the consumer story is going to drive growth going forward.