India’s central bank gov’t says inflation is a priority, but growth is important

© Reuters. FILE PHOTO: New Reserve Bank of India (RBI) Governor Shaktikanta Das attends a press conference in Mumbai, India, December 12, 2018. REUTERS/Denmark Siddiqui

MUMBAI (Reuters) – RBI Governor Shaktikanta Das told The Economic Times in an interview published on Friday that the Reserve Bank of India’s main focus is to bring inflation closer to its target, but it cannot ignore growth concerns.

“We are committed to curbing inflation. At the same time, we must keep in mind the demands of growth. There cannot be a situation where the operation is successful and the patient dies,” Das said.

“We’re going to have to bring inflation down, we can’t take such a big growth shock and that’s going to have an adverse effect on inflation. It has to be a balanced call to keep inflation in check as a priority,” he added.

Inflation based on the consumer price index rose more than expected in April to 7.79%, the highest level in eight years, and remained above the RBI’s tolerance range of 2%-6% for the fourth consecutive month.

“Our main focus right now is to bring inflation closer to our target,” the RBI chief said, with a medium-term target of 4 percent.

Das said the next step in policy action will depend on inflation forecasts drawn up by the Monetary Policy Committee (MPC) at its June meeting based on last month’s developments and their implications for the outlook.

India on Saturday announced a series of changes to its tax structure on key commodities to insulate consumers from higher prices, after the MPC raised interest rates by 40 basis points in early May.

Das said all government measures to curb inflation and recent geopolitical developments would be factored into inflation forecasts.

India’s economy recovering from the COVID-19 pandemic may have fallen to 4% again in the January-March quarter, a Reuters poll showed.

The MPC decision is due on June 8 and most economists expect another rate hike.

“Our growth scenario looks more comfortable and better than other countries. It is more important to anchor inflation, otherwise it will get out of hand,” Das said.

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