RBI sees consumer price inflation at 6.7% for FY23, says Shaktikanta Das

RBI Governor Shaktikanta Das

India's consumer price index (CPI) remains "elevated" due to large adverse supply shocks, Governor Shaktikanta Das said in his address on the RBI Monetary Policy on September 30.

CPI is "above the tolerance band" due to the firming up of domestic demand and spillovers from global markets, said the governor, adding that the Reserve Bank of India (RBI) has largely maintained the inflation forecast for all the remaining quarters of FY23 and the first quarter of FY24.

The inflation projection is retained at 6.7 percent for FY23 and inflation expected to reduce to 5 percent by April-June or first quarter of FY24. "Risks from food inflation could have adverse impact on inflation," Das said. "Inflation is hovering around 7 percent and we expect it to remain elevated at around 6 percent in the second half."

The recent correction in commodity prices, including that in crude oil, if sustained, is expected to ease the cost pressures in the coming months, according to the governor.

Amid the escalating geopolitical tensions and nervous global financial market sentiments, the Monetary Policy Committee (MPC) of the RBI was of the opinion that "persistence of high inflation necessitates further withdrawal of monetary accommodation to restrain broadening of price pressures, anchor inflation expectations and contain the second-round effects", said Das.

He added that this action will support medium-term growth prospects for the economy. Despite the unsettling global environment, the Indian economy continues to be resilient, he asserted.

Dr. Aurodeep Nandi, India Economist and Vice President at Nomura, commented on the policy saying, "The relatively unchanged growth and inflation outlook by the RBI indicates that the policy arithmetic hasn’t materially changed for it, and the reluctance to change stance from ‘withdrawal of accommodation’ indicates that more monetary policy tightening is likely to be in the pipeline."

She added, "It is important that the RBI reminded that true interest rate defence of the currency doesn’t necessarily comes not from hiking policy rates in response to depreciation, but by adhering to the flexible inflation targeting framework, thereby ensuring macroeconomic stability."