Mumbai
The central bank has been mandated by the government to ensure the Consumer Price Index (CPI) based inflation is at 4 per cent, with a band of 2 per cent on either side. The retail inflation, which was above 6 per cent during May and June, has started moving down and stood at 4.35 per cent in September.
As per the minutes of the Monetary Policy Committee (MPC) meeting held during October 6 to 8, Das said in its August 2021 meeting, the panel was faced with the challenges posed by headline inflation exceeding the upper tolerance threshold for the second successive month.
The actual inflation outcomes for July-August, with inflation registering a substantial moderation to move within the tolerance band, have vindicated the MPC’s outlook and monetary policy stance, he noted.
The more-than-expected softening of inflation in July and August this year was underpinned by the significant lowering in food price momentum, especially in August.
Going forward, the governor said if there are no spells of unseasonal rains, food inflation is likely to register significant moderation in the immediate term, aided by record kharif production, more than adequate food stocks, supply-side measures and favourable base effects.
“Volatile crude oil prices, particularly the resurgence since mid-September, is pushing pump prices to new highs, raising risk of further spillover of high transportation cost into retail prices of goods and services,” he said.
Das opined continued monetary support is necessary as the economic recovery process even now is delicately poised and growth is yet to take firmer roots.
At this critical juncture, “our actions have to be gradual, calibrated, well timed and well-telegraphed to avoid any undue surprises”, he asserted.
While voting to keep the policy rate unchanged and continue with the accommodative stance, Das said, “In parallel, we remain laser-focused to bring back the CPI inflation to 4 per cent over a period of time in a non-disruptive manner.”
All members of the MPC - Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Mridul K Saggar, Michael Debabrata Patra and Shaktikanta Das - unanimously voted to keep the policy repo rate unchanged at 4 per cent. Also, all members, except Varma, voted to continue with the accommodative stance.
Deputy Governor Patra said while the trajectory of inflation may undershoot the projections made in August, it is likely to be uneven, sluggish and prone to interruptions. Even as domestic macroeconomic configurations are improving, the risks from global developments are rising and warrant a close watch as they could stifle the recovery that is underway in India.
Exports are directly at risk from logistics bottlenecks, shortages of containers and personnel in international shipping, and elevated freight rates. Policy interventions, including coordinated multilateral efforts, are needed urgently to prevent global trade from choking, he opined.
Visit news.dtnext.in to explore our interactive epaper!
Download the DT Next app for more exciting features!
Click here for iOS
Click here for Android