India’s inflation has eased, but lingering weather related uncertainties still pose headwinds, the Reserve Bank of India governor said on Wednesday. “The war against inflation is not over, we have to remain vigilant,” Shaktikanta Das said at an event in New Delhi.
“There is no room for complacency. We’ll have to see how the El Nino factor plays out.” Year-on-year retail inflation in India eased to 4.7% in April from 5.66% in the previous month, according to government data.
This month’s retail inflation data, due on June 12, “could possibly be lower,” Das said. The RBI is targeting inflation at 4%, with a tolerance level that will expand up to two percentage points on either side.
El Nino may not only pose the risk of further fueling inflation, but may also affect India’s economic growth, Das said. Geopolitical uncertainties, falling trade in goods due to a decline in global trade could also undermine growth, he said.
India’s GDP growth could be above 7% in 2022-23 and this should not come as a surprise, the governor said. India is expected to register a GDP growth of nearly 6.5% in 2023-24, he added.
The RBI aims to remain prudent and act in a timely manner to ensure financial stability, remain proactive in foreign exchange management and focus on keeping the rupee stable, Das said.
The central bank is not focusing on “internationalising” the rupee, but it is an ongoing process, the governor said, adding that the RBI is still working on it.
Seventeen banks have opened 65 special vostro accounts to facilitate foreign trade in rupees, Das said. A Vostro account is an account maintained by a local correspondent bank on behalf of a foreign bank. The RBI has also permitted 18 countries to have trade settlement accounts, Das added.
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