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Informist, Thursday, Sep 5, 2024

 

MUMBAI - Reserve Bank of India Governor Shaktikanta Das has expressed optimism about the outlook for food inflation, saying conditions could become "more favourable" in the coming months. "With the monsoon progressing well and the healthy kharif sowing raising prospects of better harvest, there is greater optimism that food inflation outlook could become more favourable over the course of the year," Das said today at the FIBAC 2024 banking conference.

 

Das' comments come amid heavy rains in several parts of the country, with reports saying that has led to huge loss of crops. Above normal rains in September, as forecast by the India Meteorological Department, could hurt kharif crops such as vegetables, fruits, and pulses. This could lead to food inflation--the biggest obstacle to the RBI cutting interest rates--remaining elevated.

 

As per the latest data, Consumer Price Index inflation plunged to a multi-year low of 3.54% in July thanks to a favourable base effect which also helped drag down food inflation to 5.42% from 9.36% in June. Food inflation has been a constant thorn in the RBI's side as it has forced the central bank to keep interest rates unchanged for more than a year even as core inflation has slumped below 4%. 

 

The July inflation print was the first time that headline retail inflation fell below the RBI's medium-term target of 4% since September 2019. In his speech, Das reiterated that the fall in inflation has been "frequently interrupted by volatile and elevated food inflation".

 

However, he looked to again dismiss any ideas about the RBI focussing on an inflation measure other than the headline figure, saying it is headline inflation "that matters".

 

"We have to remain watchful of how the forces impacting inflation play out. The balance between inflation and growth is well-poised. We must successfully navigate the last mile of disinflation, and preserve the credibility of the flexible inflation targeting framework," he said.  End

 

Reported by Siddharth Upasani and Sachi Pandey

Edited by Aditya Sakorkar

 

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