The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) minutes, released today (December 20), underscore the central bank’s ongoing battle to manage inflation and its commitment to supporting growth.
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Former RBI governor Shaktikanta Das reiterated that reducing inflation and aligning it with the target is essential for fostering sustainable growth. He stressed that price stability is the biggest support for higher growth, and maintaining the neutral stance is the prudent approach to avoid counterproductive timing.
RBI Deputy Governor Michael Patra highlighted that core inflation has risen by 70 basis points since July, adding that the monetary policy stance remains open to supporting growth but must wait for inflation to moderate.
India’s retail inflation dropped to 5.5% in November from a 14-month high of 6.2% in October, driven by a cooling of food prices. However, food inflation remained elevated in certain categories, such as potato and garlic, while some pulses were also seeing double-digit inflation.
Core inflation is expected to stay contained, with headline inflation projected to ease to 4.5% in Q4 of FY24.
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RBI Executive Director Rajiv Ranjan pointed out that the bank’s cautious and calibrated approach has been effective, and the need to monitor upcoming data remains critical. He added that if food price pressures subside, there may be room to normalise rates.
External MPC member Nagesh Kumar expressed concern over the 6.2% inflation rate, pointing out that monetary policy cannot address seasonal variations in inflation. He also mentioned the sharp economic slowdown and the need for monetary support to navigate these challenges.
The RBI also expects food inflation to ease in Q4FY25, driven by factors like improved vegetable prices, strong harvests, and adequate cereal stocks. However, the committee cautioned that adverse weather events and rising international agricultural commodity prices could pose upside risks to food inflation.
(Edited by : Shoma Bhattacharjee)
