His remarks came after Prime Minister Narendra Modi urged voluntary austerity, including cutting down on petrol and diesel use and putting off gold purchases, to preserve foreign exchange reserves. The duty on gold was more than doubled and more measures to curb demand for imported goods are likely, Bloomberg News reported earlier.
“If this is to continue for longer period of time, it is just a matter of time before the government will pass on some of the price increases,” Malhotra said at a conference hosted by the Swiss National Bank and the International Monetary Fund in Switzerland on Tuesday. Excise duties had been cut while state-run fuel retailers were absorbing the increase in crude prices as the conflict continues, he added.
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India’s inflation edged up to 3.48% in April from 3.40% in March, coming in lower than expected as the government absorbed higher crude costs. However, risks remain as rising energy prices from the West Asia conflict weigh on the outlook.
Supply-chain disruptions in the region are beginning to hit India. “We have this framework of flexible inflation targeting, but in such times it’s not sufficient,” he said, adding that fiscal coordination becomes critical “if the supply shock is as big as it is.”
There’s more to Uber’s India data centre bet than meets the eyeRBI has forecast growth of 6.9% this financial year, with inflation averaging 4.6%. However, economists expect growth to slow further and inflation to rise due to the conflict. RBI left its key policy repo rate unchanged at 5.25% in April. “We are being more and more data dependent. We are taking it more meeting by meeting,” Malhotra said.