In a speech on Wednesday, Reserve Bank of India (RBI) Governor Shaktikanta Das stated that vegetable prices in India have started to soften and are projected to drop starting in September.
Vegetable and grain prices are skyrocketing, which has caused retail inflation to soar to 7.44% in July, its highest level in 15 months.
According to Das, “We anticipate an appreciable slowdown in vegetable inflation beginning in September.”
Despite the possibility that global tensions will lower food prices, he said the forecast for grain prices was positive.
Das argued that monetary policy transmission is evidenced by the gradual lowering in core inflation over the past few months, despite core inflation being elevated.
According to him, the central bank would be vigilant to prevent persistent inflation from spreading to other market segments.
“The ongoing process of anchoring inflation expectations, which began in September 2022, is at risk due to the frequent occurrences of recurring food price shocks. We will continue to keep an eye on this, added Das.
Since May 2022, India has increased interest rates by a total of 250 basis points to control inflation. According to Das, the Monetary Policy Committee’s legislated medium-term aim of 4% inflation is still the central bank’s primary goal.
He asserted that the foundation of sustained growth must be price stability and added that the circumstances are favorable for the growth to continue and the capex cycle to pick up steam in 2023–2024.
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The head of the central bank reaffirmed that there is no set aim for the rupee but that the RBI will keep increasing its foreign exchange reserves to help control any dollar outflows.
By preserving external stability and accumulating foreign exchange reserves, the Reserve Bank has also taken deliberate measures to increase systemic resilience and effectiveness, he added.
