“We have said earlier that we would like to bring down inflation over a time period of about two years or so,” Das told ET Now in an interview. “We are moving to 4% inflation in a steady manner without too much growth sacrifice.”
The Governor added that several analysts, market participants and forecasters are pointing to the fact that expectations around inflation are getting anchored. “Inflation has moderated from the peak,” Das said. “Bond yields at the long end are reflecting the anchoring of inflation. Softening of crude and commodity prices are also supportive. The aim is now to bring down inflation below 6% and then the target towards 4%.”
Das said several factors contribute to inflation, including the global spillovers from areas like Europe and the US.
The latest data show India’s consumer price inflation fell to a five-month low of 6.71% in July. Despite the numbers indicating a cool-off, consumer inflation has been above RBI’s tolerance band and medium-term target for 34 straight months.
“We will approach the 4% inflation target in a steady manner, without much of growth sacrifice,” Das said. The RBI has raised key policy repo rate by 140 basis points since May to bring down consumer inflation.
Das also said the current account deficit (CAD) will be within manageable levels and its financing will be in a reasonably comfortable manner.
“In the Reserve Bank and MPC we have assumed crude oil prices at $105 as the average price for the current year, so therefore, according to our assessment, CAD will be within manageable levels and we will be able to finance it in a reasonably comfortable manner.” Das said.
The governor also said India’s macroeconomic fundamentals were strong, leading to greater investor interest in the country. “Globally also international investors are looking at India with greater optimism. Just imagine the country has witnessed two major shocks, two Black Swan events for the entire world: the Covid-19 pandemic and the war in Europe,” he said. “Despite these two huge shocks, our macroeconomic fundamentals remain resilient, our financial stability is also maintained; and the growth we are expecting, according to our projections, it is 7.2%, and inflation is moderating, capital inflows are there. So, there is financial and macroeconomic stability. Not many countries around the world have done it.”
