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RBI Ashima Goyal, a member of the Monetary Policy Committee (MPC) of India, said on Sunday that inflation is expected to come down this year. A flexible inflation targeting regime as well as supply-side action have kept the rate of price rise low compared to other countries, he said. Goyal said that India has successfully faced the challenges in the last three years by showing great resilience. He said, the inflation rate is expected to come down throughout the year. The government’s supply-side action coupled with a flexible inflation targeting regime has kept India’s inflation rate low compared to other countries, he said.
Repo rate increased by 2.5 percent
He was asked whether high inflation has become a normal situation in India. He said policy rates were cut drastically during the pandemic, so they had to be raised sharply after the revival. Goyal further added, but due to lack of external demand, there should not be much increase in the policy rates at present. Domestic demand should be allowed to compensate. The Reserve Bank of India (RBI) has increased its key repo rate by 2.5 per cent since May last year. RBI has reduced the inflation forecast based on consumer prices to 6.5 percent from 6.7 percent for the current financial year.
Risks remain due to geopolitical challenges
India’s retail inflation stood at 6.52 per cent in January. To a question on what impact the hot weather could have on the wheat crop and food inflation, he said as the weather pattern has become uncertain, it is necessary to bring in resilience in agriculture. He said that work is being done in this direction. He added that risks remain due to geopolitical challenges.
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