RBI Governor Says India Vulnerable To Recurring Food Price Shock

Despite the recent moderation in inflation and the government’s measures to curb the rising cost of essential food commodities, the RBI governor stated in a public address on how India is prone to ‘recurring and overlapping’ food price shocks. At a symposium organised by the Institute of Indian Economic Studies in Tokyo, Japan, Shaktikanta Das said on Thursday that the monetary policy continues to remain watchful and actively taking measures to align the inflation to target, while also supporting growth.

The retail inflation based on the Consumer Price Index eased to a 5.02% in September but remained above the RBI’s targeted 4% on the back of softer vegetable prices. Between May 2022 and Feburary 2023, the rate-setting panel has raised its repo rates by 250 basis points which have remained consistent in the four meetings conducted since. Das also added that a combination of factors coupled with steps taken by the RBI have managed to create a sense of stability against large and overlapping global shocks, while also improving macroeconomic fundamentals and buffers.

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The panel further predicted that the inflation rates for the year 2023-24 will be an average 5.4% as opposed to the steep 6.7% in 2022-23. Among other things, he also pointed out how UPI modes of payment have improved the delivery of financial services by making them faster, cheaper, efficient and accessible to the common man. He was quick to point out that recent occurrences of the Ukraine war, fallout from the pandemic and the tightening of the monetary policy creates a challenge of growth versus inflation and price stability versus financial stability; as well as current exigency versus future sustainability.