Reserve Bank of India (RBI) governor Shaktikanta Das has denounced the possibility of the Indian economy getting stuck in stagflation, while adding that inflation was expected to come down going forward despite the unimaginably and uncertain global crude oil prices.
Stagflation is a term form an abnormal combination of high inflation and unemployment coupled with low growth.
The Reserve Bank of India governor while talking at the Confederation of Indian Industry meet, on Monday, told the industrialists that the central bank will carry on with providing abundant liquidity to facilitate the needs of the productive segments of the economy.
“In our assessment stagflation risk prospects don’t exist,” said Das at the meeting. “India is far away from such a grim prospect,” he added.
He said that a review of the inflation projections is expected at the next meeting of the monetary policy committee (MPC) on account of the Russia-Ukraine war that has toppled all calculations on crude and commodity prices.
The recent geopolitical tensions amid Ukraine and Russia war have sent oil prices spiralling and have raised the concerns of a severe hit to India’s economic recovery in the aftermath of the pandemic.
Just the last month, the Reserve Bank of India’s monetary policy committee continued its accommodating posture and kept the key lending rate at record lows in order to help the economy recover from the pandemic induced economic slump, even when the inflation has scaled up.
“The point is if you start initiating a premature demand compression through monetary policy action, then it would act counterproductive,” Das said while adding that the Reserve Bank of India was supportive of growth.
Das said on Monday that India was “placed comfortably” to dispense any spillovers from the Federal Reserve’s rate hikes and there was “reasonable confidence” that the RBI will be able to maintain the stability of the rupee.
The governor said that the Reserve Bank of India was closely keeping a watch on the prices of the crude and commodity and would make clear its expectations and roadmap on inflation in the upcoming monetary policy meeting that is to be held the next month.
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