Mumbai, Jun 25: Shaktikanta Das has said the Reserve Bank will strive to get headline inflation to its 4 per cent target but flagged El Nino as a challenge to its efforts.In an exclusive interview with a news outlet at his office in this city, Das showed confidence in the prediction by the RBI that the economy will expand by 6.5 percent in FY24. Inflation was brought down to 4.25 percent in May from a peak of 7.8 percent in April last year thanks to supply-side government policies and rate increases by the central bank totaling 2.50 percent since May of last year, according to Das.”We are still keeping a close eye on inflation. We anticipate that inflation will be 5.1% in FY24, and we will keep working to bring it down to 4%, he added.
Regarding the high borrowing costs, Das stated that interest rates and inflation are directly correlated, and the RBI can lower interest rates if persistent consumer price inflation falls to around 4%. The governor noted that the Russia-Ukraine war, which caused a spike in commodity prices, also caused an increase in inflation, but added that since oil prices have dropped to around USD 76-76 a barrel, there is no longer an issue with inflation.
According to Das, the price of food has also decreased, and this has been aided by actions like the Food Corporation of India releasing its supplies of wheat and rice.He stated that targeted reductions in levies on particular products had also been beneficial. Das cited two or three issues, including the unstable worldwide scenario owing to geopolitics and the domestic monsoon condition, when questioned about the challenges on the inflation front.”Even if a typical monsoon is anticipated, El Nino is a cause for concern. We must first determine how serious it is. Other difficulties are mostly weather-related incidents, which can affect the inflation of food, said Das, who added that we will have to deal with these uncertainties.While some observers, such as the IMF, believe it to be significantly lower, Das said that the RBI has taken all the considerations into account while coming to its projection of a 6.5 per cent expansion in real GDP and is optimistic that the economy would achieve the same level.According to him, the bank loan growth of about 16% is sustainable, and the RBI is keeping an eye on any changes in this area. He emphasised that the total credit increase is broad-based and that there is significant demand for credit from corporations as well, notably for project loans.According to Das, who reiterated that the RBI will keep up its efforts to decrease volatility, the rupee has been less volatile in 2023 and has risen against the dollar. Das asserted that he is convinced the rupee won’t be negatively damaged even if the US Fed raises interest rates, noting that the local currency has remained stable despite a 5 percentage point increase in rates in the US.The governor predicted that the current account deficit (CAD) in FY24 will be “eminently manageable” due to factors including increased exports of services and falling crude prices.
