Staff of Reuters 3 Minutes to Read MUMBAI, India (Reuters) – Governor Shaktikanta Das told a local newspaper in an interview that India’s central bank wants to anchor inflation expectations as it focuses on reviving economic growth, and urged the government to look into lowering fuel taxes to relieve price pressures. Shaktikanta Das, Governor of the Reserve Bank of India (RBI), speaks at a press conference following a monetary policy review in Mumbai, India, on February 7, 2019. FILES/Francis Mascarenhas/REUTERS In an interview published on Thursday, Das told the Business Standard, “We are acutely aware and sensitive to the fact that a hasty reversal of monetary policy stance or monetary policy approach can have serious consequences for the economic, recovery.” “However, in the medium term, we also want to anchor inflation expectations within the tolerance band and closer to the inflation target,” he added. According to a Reuters poll, India’s retail inflation is expected to have accelerated to a seven-month high in June due to rising food and fuel prices, remaining above the Reserve Bank of India’s comfort zone of 2% -6 percent for the second month in a row. On Monday, the data is due. Das stated that the RBI would like to keep inflation expectations at around 4% pre-pandemic levels, as this reduces investor uncertainty and promotes growth. “The government has taken some supply-side measures in recent weeks,” Das said, “but more supply-side measures are needed, and we are actually looking forward to more of them, particularly on taxes from both the federal and state governments.” Late last month, India extended federal guarantees on bank loans to small businesses, the health-care sector, and the tourism industry to help them cope with the COVID-19 pandemic, but it did not provide any direct stimulus to boost demand or ease price pressures. Inflationary pressures have been exacerbated by high domestic fuel taxes combined with a rise in global crude oil prices. The policy actions of the US Federal Reserve, according to Das, will have an impact on all economies, including India’s. He also warned about the risks of capital flow volatility, noting that advanced economies’ ultra-accommodative policies have kept global liquidity flush, and that emerging economies must build their own safety nets. According to Das, India’s foreign exchange reserves, which total $609 billion, are sufficient to support nearly 15 months of imports and cover more than the country’s overall external debt. “Our current reserve level offers us comfort, but we must not become complacent.” Swati Bhat contributed reporting, and Shri Navaratnam edited the piece./n
Read More
