Mumbai (Reuters) – India is vulnerable to “recurring and overlapping” food price shocks despite the recent moderation in inflation, the governor of the Reserve Bank of India (RBI) said on Thursday.
“In these circumstances, monetary policy remains watchful and actively disinflationary to progressively align inflation to the target, while supporting growth,” Shaktikanta Das said in a speech delivered in Japan.
India’s retail inflation eased to a three-month low of 5.02% in September on the back of softer vegetable prices, but remained above the RBI’s 4% target.
The central bank, which has kept the key policy rate unchanged over the last four meetings, expects inflation to average at 5.4% in fiscal year 2023-24, a moderation from 6.7% in the last fiscal year.
Governor Das had said in early October the central bank remains highly alert and prepared to take steps to align inflation to the target.
Retail inflation data for October is due Nov. 13.
The recent developments in West Asia have added to the “litany of challenges” for the global economy, the RBI chief said on Thursday, adding that the central bank has bolstered foreign exchange reserves to deal with potential eventualities.
India’s growth remains on track, and its current account deficit “eminently manageable”, while the balance sheets of banks and corporates are healthy, the RBI governor said.
Meanwhile, a linkage of India and Japan’s fast payment systems may be explored to make cross-border payments more efficient and less costly, the governor said.
