India’s central bank says the pace of inflation in the country is slowing at a faster pace than expected – a development that may help interest rates stay at record lows.
Reserve Bank of India’s deputy governor Michael Patra said inflation has moderated into the regulator’s tolerance range and has vindicated the stance adopted by the monetary policy committee (MPC).
Economic growth in the first quarter is nearly in line with the bank’s forecast and the country is on course to achieve a projected growth rate of 9.5% in the year ending March 2022.
4% inflation target
“Taking into account the outlook on growth and inflation, and keeping in mind the inherent output costs of disinflation, it is pragmatic to envisage a glide path along which the MPC can steer the path of inflation into the future.
“The envisaged glide path should take inflation down to 5.7% or lower in 2021-22, to below 5% in 2022-23, and closer to the target of 4% by 2023-24,” Patra said.
India’s consumer price inflation eased for a second successive month in August. Inflation based on the consumer price index (CPI) accelerated at 5.30% in August, after increasing 5.59% in July and 6.26% in June.
The Reserve Bank of India, the nation’s central bank, is trying to keep retail inflation at or below 4%, with a margin of 2% on either side.
In its monthly publication released on 16 September, the central bank said that the growth prospects for the economy are brightening as it comes out of the shadows of the COVID pandemic. The central bank said its preparedness remains on war-alert status.
"Aggregate demand is gaining firmer ground, while on the supply side, IIP (Index of Industrial Production) and core industries mirror improvement in industrial activity, and services sector indicators point towards sustained recovery,” the central bank said in the monthly bulletin.