Will strive to get CPI down to 4%; El Nino a challenge for inflation: Das

Contact Counsellor

Last Updated27/06/2023

RBI Governor has said the Reserve Bank will strive to get headline inflation to its 4% target but flagged El Nino as a challenge to its efforts.
The economy will grow at 6.5% in FY24, as estimated by the RBI earlier.

The central bank’s rate hikes by a cumulative 2.50% since May last year, coupled with supply-side measures from the government, have helped get the inflation down to 4.25% in May from a peak of 7.8% in April last year.
On the high borrowing costs, interest rates have a direct relation with inflation, and the RBI can cut interest rates if the consumer price inflation cools down to 4% or thereabouts on a durable basis.
The Russia-Ukraine war, which led to a shoot-up in the commodity prices, led to a surge in inflation, but crude prices are not a concern from an inflation perspective now as they’ve come down to USD 76-76 a barrel.
Food inflation has also come down as measures like the Food Corporation of India releasing wheat and rice stocks have also helped.
Targeted cuts in duties on certain products have also helped.

An estimate of a 6.5% expansion in real GDP
Bank credit growth of around 16% is sustainable, and the RBI is watchful of the developments on this front.
There is a lot of demand for credit from corporates as well, including for project loans as well.
The rupee has been less volatile in the calendar year 2023.
The domestic currency has strengthened against the dollar, reiterating that the RBI will continue with its efforts to reduce volatility.
The rupee will not get impacted even if the US Fed hikes rates, pointing out that the domestic currency has been stable, even in the face of a 5 percentage points increase in rates in the US.