RBI Governor: India’s Retail Inflation Likely Rose to 6 Per Cent in January

The Reserve Bank of India (RBI) Governor Shaktikanta Das indicated on Monday that India’s retail inflation for January, which would be released later in the day, may have accelerated to 6%, the central bank’s top tolerance limit. “The current inflation rate is estimated to be around 6%. That should not come as a surprise or cause anxiety because we have taken that into account “After the RBI Board meeting, Das gave a press conference.

Earlier as per a Reuters poll of 37 economists, inflation is rising over the world, including in India, but price increases have been moderate by historical standards, allowing the central bank to keep interest rates constant for the time being.

Despite this, prices of everyday items such as tea, cooking oil, and beans have risen by 20% to 40% since the start of the COVID-19 pandemic. Last month, prices of food, vegetables, fruits, and edible oil showed signals of moderation as compared to the previous month.

Inflation, as measured by the consumer price index (CPI), climbed to 6.00 percent in January on an annual basis, the highest in seven months, according to a 7-9 poll of 37 experts. Over one-third of respondents (14 of 37) projected inflation to exceed the Reserve Bank of India’s 6.00 percent maximum limit.

“Inflation and growth are in a delicate balance, and the Reserve Bank is fully cognizant of its commitment to inflation,” Das noted. The remarks were made following a post-budget meeting with Finance Minister Nirmala Sitharaman and the board of the central bank.

Despite recent spikes in global crude oil prices, Das maintained that India’s inflation trend has been on the down since October, and that the central bank had considered all scenarios.

The RBI’s monetary policy committee held rates and stance constant last week in order to promote a broad-based recovery, with retail inflation expected to fall to 4.5 percent in the coming fiscal year. Das also stated that the Reserve Bank of India is working on the country’s borrowing program for the coming fiscal year, as well as the country’s inclusion in global bond indexes.

The monthly CPI inflation figures will be released later today by the National Statistical Office (NSO), Ministry of Statistics and Program Implementation. India’s wholesale inflation fell to 12.96 percent in January from 13.56 percent the previous month, according to figures issued by the Ministry of Commerce and Industry on Monday.

Inflation based on the Wholesale Price Index (WPI) has been steadily declining in recent months. It decreased from 14.87 percent in November 2021 to 13.56 percent in December 2021 and 12.96 percent in January 2022.

The government plans to borrow up to 14.95 trillion rupees from the market next fiscal year, with traders anticipating the RBI will intervene by announcing open market bond purchases or other measures to help the market absorb the supplies. Das believes that the government’s intention to offer sovereign green bonds will broaden the pool of international investors.