Advertisement

India must avoid 'adventurism', focus on bringing down inflation, cenbank chief says

International Monetary Fund and the World Bank meeting in Marrakech

By Jaspreet Kalra

MUMBAI (Reuters) - India should avoid "adventurism" and continue to focus on bringing down inflation towards the target of 4% despite the growing clamour to signal a pivot in monetary policy, Reserve Bank of India Governor Shaktikanta Das said on Tuesday.

"At this point there is again clamour that one should change the stance. But we want clear evidence that inflation should moderate and perhaps a little faster. It will be too premature to talk in terms of changing the stance," Das said at an ET Now Leadership Dialogues event.

"Any form of adventurism should be shunned, it is better to stay the course and be watchful and play ball by ball."

The central bank kept the key repo rate unchanged at 6.5% for an eighth straight policy meeting earlier this month saying robust economic growth will give it space to focus on bringing down inflation towards its medium-term target.

Strong momentum in the South Asian nation's economic activity has continued in the first quarter of the new financial year that started in April with private investment also picking pace, Das said during a speech at the event.

He said there is no room for complacency but current confluence of factors was strongly favourable for India's growth and stability.

India's economy expanded at a much faster-than-expected rate of 8.2% in the fiscal year that ended in March and RBI expects it to grow by 7.2% in the current fiscal year.

Rural demand, which was earlier lagging behind, has also visibly improved and trends indicated that rural demand will hold going ahead, Das added.

Despite global growth yet to pick up, Das said external demand was expected to remain strong and will give a lot of support to India's merchandise and services exports.

On inflation, Das said prices were moderating but at a very slow pace and reiterated that the last mile of disinflation was proving "sticky, arduous and very slow". Core inflation reached a historical low of around 3% in May, he added.

Bringing down food inflation which has primarily been driven by supply side pressures like extreme weather, however, remains challenging, Das said.

Annual retail inflation in May rose 4.75%, slower than 4.83% in April and below 4.89% forecast by 50 economists polled by Reuters.

(Reporting by Jaspreet Kalra, writing by Swati Bhat, editing by Sudipto Ganguly)