Shaktikanta Das, governor of the Reserve Bank, said on Wednesday that although there is no space for complacency and the fight on inflation would continue, inflation has slowed and the next print is anticipated to be lower than 4.7%.
In April, retail inflation decreased to 4.7%, its lowest level in 18 months, mostly as a result of declining food costs.
“Inflation has subsided, and the most recent reading is 4.7%. Speaking to the CII members present, he stated, “Perhaps the next print might be lower.
The governor highlighted, however, that despite the fact that inflation has abated, there is still no need to get complacent.
According to him, inflation was seemed to be under control, but the abrupt start of the Russia-Ukraine conflict altered everything, disrupting the global supply chain and firming up prices for commodities throughout the world.
He reassured that the fight against inflation is not done and that the RBI would continue to be vigilant about changing circumstances.
Das said that there is a foundation for promoting domestic development, drawing assurance from macroeconomic stability.
When discussing macroeconomic stability, he said that the inflation rate has reduced, the GDP is growing steadily, and the current account deficit is under control.
He said that the budget imbalance is headed towards reduction.
“So, on the back of macroeconomic stability and a robust financial sector…the percentage of gross non-performing assets of the banking sector at the systemic level was 4.4 per cent at the end of December 2022,” he said.
So, he said, the non-performing asset, which had been a major problem for the Indian banking industry, has decreased and is shown excellent indications of fortitude.
Additionally, he said, credit offtake in banks is still very robust and is at 15.5 percent.
“On top of that, we also have the benefit of demographics, which presents India with still another enormous potential. And it's something that will ultimately increase our production potential, or as some like to refer to it, India's growth potential. That's a trend that will emerge over the course of the next several years, he said.
On the strength of these positive factors, he expressed optimism that India might post growth of 6.5% during the current fiscal year.
According to Das, a slowdown in exports is another danger to the Indian economy's downside, along with any shocks on the geopolitical front.
He mentioned El Nino as another potential issue, citing the India Meteorological Department (IMD).
“There is indications of a positive Indian Ocean Dipole, which should be able to attenuate the effects of El Nino to some degree. Let's leave it to the weather experts, however. But only time will tell how much this uncertainty will impact our economy, he added.
He emphasised that a number of elements are coming together to support the Indian development narrative and pledged that the RBI would continue to be proactive, vigilant, and cautious as it worked to assist the Indian economy and preserve its financial stability.
