Reserve Bank Governor Shaktikanta Das on Tuesday said the disinflation process in India will be slow.
“As per our current assessment, the disinflation process is likely to be slow and protracted with convergence to the inflation target of 4 per cent being achieved over the medium-term,” Das said in his address at the Summer Meetings organised by Central Banking in London.
In remarks that came a day after official data suggested a cool-down in headline inflation to 4.25 per cent for May, Das said there have been signs of some softening in inflation in recent months, with the consumer price inflation coming down from the 7.8 per cent peak in April 2022.
He said the RBI’s inflation projection for the current financial year 2023-24 is lower at 5.1 per cent, but reminded that the number will still be above the 4 per cent target.
The rate-setting panel has eschewed from providing any future guidance on the timing and level of the terminal rate recognising that explicit guidance in a rate tightening cycle is inherently fraught with risks, Das said. The RBI is mandated to maintain price stability while keeping in mind the objective of growth, Das said, adding that the central bank cannot be oblivious to growth concerns, given the high population and the necessity to reap the demographic dividend.
The RBI prioritised growth during the pandemic years even as inflation remained above the target but within the tolerance band, Das said. The Monetary Policy Committee prioritised growth over inflation at the height of the pandemic during 2020 and 2021, given the frail economic conditions and notwithstanding intermittent inflationary pressures from supply shocks, he added.