India's Inflation Target Remains Around 4 Per Cent, Keeping Food Prices Under Control Crucial, Says RBI Governor

The governor revealed that the official aim is to not reduce inflation below 4 per cent, however, maintain a ‘durable alignment to the inflation rate of 4 per cent’

The Reserve Bank of India Governor, Shaktikanta Das, on Tuesday said that the inflation target for the Indian economy remains around 4 per cent. Speaking in an interview with NDTV Profit on August 20, 2024, the official said that the average inflation rate for the 2024-25 fiscal year for India remains at 4.5 per cent.

The governor revealed that the official aim is to not reduce inflation below 4 per cent, however, maintain a ‘durable alignment to the inflation rate of 4 per cent’. Das explained the importance of keeping food inflation under control and not just focus on reducing core inflation. 

“If our food prices are high and our core inflation decreases and we say inflation has reduced, it wont be credible from the common man’s point of view. Food inflation is a very big imortnat component in our headline inflation target as the food inflation accounts for 46 per cent of the consumption basket,” the governor noted. Notably, inflation is calculated on the basis of the consumption basket. 

The governor remained confident that inflation in the country is reducing and should gradually reach near 4 per cent.

Interest Rates And Impact On Growth

On predicting a revision in the monetary policy, Das said that any reduction or change in the interest rates would be dependent on the data in the future. He noted that the authorities dont want to confuse the public by giving a guidance and then failing to adhere to it due to circumstances.

The governor added that the growth impact of the monetary policy so far has been neglibile. “We have to be patient and the growth sacrifice so far is minimal. This year our growth projection is 7.2 per cent and India will remain the fastest growing economy in 2024-25 and this is why our growth sacrifice is minimal. Growth remains intact and is stable and resilient,” Das stated.

Indian Economy Post Pandemic

Regarding the Indian economy’s journey post the COVID-19 pandemic, the governor said that the country has handled the crisis during and after the pandemic really well. He credited the performance of the economy to the coordinated efforts of the government and the RBI. “The fiscal monetary coordinated approach was very solid and was the main reason why we could navigate it well,” he noted.

Das said that building confidence and liquidity in the domestic economy was the major challenge for the banking regulator after the pandemic. He pointed out that COVID-19 resulted in a permanent output loss for every economy in the world.