Reserve Bank of India (RBI) Governor Shaktikanta Das said on Tuesday (18 June, 2024) that despite efforts to reduce India’s retail inflation to the target of 4%, high food prices are slowing the progress.
At an ETNow event, Das said, “The disinflationary process is facing a lot of resistance from food inflation which is stubborn and high, primarily due to supply side factors affected by weather conditions.”
Das highlighted that similar to some advanced economies, the final phase of reducing inflation is challenging and tough.
“There are a lot of uncertainties; food inflation continues to be high. The average food inflation in the last seven months has been around 8 per cent,” Das said.
He also pointed out that it is too early to change the current policy stance and that any risky moves should be avoided. He added that the central bank remains alert in monitoring the situation.
The six-member rate-setting panel has maintained the “withdrawal of accommodation” stance and kept the repo rate unchanged for eight consecutive bi-monthly reviews.
However, there are now two dissenters in the committee. Das reiterated his earlier comments, mentioning that the final phase of reducing inflation is proving to be the most challenging.
Inflation is decreasing, but slowly, according to Das. The RBI is confident this trend will continue, but speeding up inflation reduction would impact economic growth.
The RBI has consistently voiced concerns about increasing food costs.
Also Read: Monetary Policy Meet June 2024: RBI Keeps Repo Rate Unchanged at 6.5%
Although retail inflation based on the Consumer Price Index fell to a one-year low of 4.75% in May, food inflation remained high at 8.69%, slightly lower than April’s 8.70%.
Similarly, rising food prices affected wholesale prices, with WPI-based inflation reaching a 15-month high of 2.61% in May.
Inflation in food articles surged to a 10-month high of 9.82% in May. Vegetable prices rose to 32.42%, up from 23.60% in the previous month. Onion prices increased by 58.05%, while potato prices rose by 64.05%. Pulses inflation stood at 21.95% in May.
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