The Reserve Bank of India (RBI) Governor, Shaktikanta Das, expressed satisfaction with the cooling off of headline inflation to 4.7% in April, indicating that the monetary policy is on track. Official data released on Friday confirmed the drop in inflation, providing confidence that the RBI’s policies are effective. However, Governor Das refrained from commenting on whether the release of the figures would prompt the RBI to be less hawkish or alter the policy stance. He indicated that the decision would be evident during the policy review scheduled for June 8th.
The drop in inflation can be attributed to a reduction in food and fuel prices. Despite concerns over a surge in COVID-19 cases, inflation has remained within the RBI’s target range of 2-6%, with April’s reading the lowest in the current fiscal year.
Governor Das has previously emphasized that the RBI would prioritize growth over inflation management. The central bank’s accommodative stance is expected to remain until the economy returns to pre-pandemic levels. The RBI has slashed its key interest rate by 250 basis points since February 2019, with the latest cut of 115 basis points in response to the pandemic.
However, the RBI has also expressed concerns about rising inflationary pressures, particularly from rising commodity prices and supply chain disruptions. The central bank has been cautious about withdrawing liquidity too soon, as the economy is still grappling with the impact of the pandemic.
The RBI’s next policy review is scheduled for June 8th, where the central bank will consider the current economic environment, inflation trends, and growth prospects. The recent drop in inflation may provide some respite to the RBI, which has been grappling with balancing growth and inflationary pressures.
Governor Das’s comments reflect the RBI’s confidence in its monetary policy stance, given the recent drop in inflation. The central bank’s accommodative stance is likely to remain until the economy returns to pre-pandemic levels, with inflation management being a secondary priority. However, the RBI will continue to monitor inflationary pressures closely and adjust its policies accordingly to maintain price stability.
