Reserve Bank of India (RBI) governor Shaktikanta Das has said the RBI will strive to get headline inflation to its 4 per cent target but flagged El Nino as a challenge to its efforts. He exuded confidence that the economy will grow at 6.5 per cent in FY24, as estimated by the RBI earlier. He noted that the central bank's rate hikes by a cumulative 2.50 per cent since May last year, coupled with supply-side measures from the government, have helped get the inflation down to 4.25 per cent in May from a peak of 7.8 per cent in April last year.
On the high borrowing costs, Das said interest rates on loans may have a direct relation with inflation, and if inflation cools down on a durable basis, people can expect lower interest rates on loans. He explained that the Russia-Ukraine war, which led to a shoot-up in the commodity prices, led to a surge in inflation, but added that crude prices are not a concern from an inflation perspective now as they've come down to $76-76 a barrel. He said food inflation has also come down, and added that measures like the Food Corporation of India releasing wheat and rice stocks have also helped.
The Governor said targeted cuts in duties on certain products have also helped. When asked about the challenges on the inflation front, he pointed to 2-3 factors like the volatile international situation due to geopolitics and the monsoon situation domestically. Although there is an expectation of a normal monsoon, there are concerns around El Nino.
