“The situation is very dynamic and the war against inflation is not over, we have to remain alert, there is no cause for complacency, we have to see how the El Nino factor, what is anticipated, will play out,” Das said at the Confederation of Indian Industry Annual Session.
Global inflationary pressures are showing signs of abetment, though they remain well above the target in most of the countries, the governor also said.
India’s consumer price inflation (CPI) eased to an 18-month low of 4.7% in April, from 5.66% in the previous month, largely due to a moderation in food prices, which accounts for nearly half of the overall consumer price basket. The RBI expects the next print of retail inflation to be lower than 4.7 per cent.
Inflation data for May is due on June 12. The country’s retail inflation was closest to the 4%-mark last in January 2021 at 4.06%. Consumer prices in India had surged to an eight-year high of 7.80% in April 2022.
India’s retail inflation was above RBI’s 6 per cent target for three consecutive quarters and had managed to fall back to the RBI’s comfort zone only in November 2022.
The RBI’s MPC has increased the repo rate by 250 basis points since May last year to quell inflationary pressures. Most economists expect the MPC to hold rates for the second time when it meets next month. March was the first month this year so far where India saw the retail inflation reading dropping below the 6 per cent RBI tolerance limit.”When the war came as a surprise, naturally as a central bank we cannot say that we will not give any surprises. We also had to do a surprise meeting last year (for policy rate hike),” Das said.
The governor said RBI had faced criticism back then, but the markets missed out at tat time was in April last year the central bank had given some signals of its impending actions.
“We had changed our priority to inflation over growth and we had given some indications saying the Reserve Bank is monitoring the situation closely and we will not hesitate to act,” Das said.
The governor today also said the RBI will ensure adequate availability of liquidity to meet production requirements of the economy.