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India central bank gov says priority is inflation, but growth important


© Reuters. FILE PHOTO – Shaktikanta, the Reserve Bank of India Governor (RBI), attends a Mumbai news conference on December 12, 2018, in Mumbai. REUTERS/Danish Siddiqui

MUMBAI, (Reuters) – While the primary goal of Reserve Bank of India is to reduce inflation to a more manageable level, it must also address concerns about growth. Governor Shaktikanta Das spoke to Economic Times on Friday in an interview.

We are determined to contain inflation. We must also remember the needs of growth. Das explained that there can’t ever be an instance where the surgery is successful but the patient is still alive.

We will need to reduce inflation. However, we cannot afford a large growth shock that will negatively affect inflation. He said that it must be balanced and inflation control should be the priority.

The consumer price index-based inflation increased more than anticipated to 7.79% for April. This is an eight-year record and remains above the RBI’s 2%–6% tolerance band for a forth consecutive month.

According to the RBI chief, “our main focus right now is to lower inflation towards the target”, which has been set at 4% in the medium-term.

Das indicated that the next policy move would depend upon the inflation forecast (MPC) made at the June meeting. Based on developments in the past month and how these affect the outlook, Das explained.

India has announced changes in the tax structure for key commodities. These are in response to a 40-basis point rate rise by the MPC in May.

Das claimed that the inflation projections will include all government measures to control inflation, as well recent geopolitical developments.

A Reuters poll revealed that India’s economy recovery following the COVID-19 pandemic was likely to have stalled again at 4% during the January-March quarter.

On June 8, the MPC will announce its decision. Most economists anticipate another rate hike.

“Our growth scenario is much more secure and positive than in other countries.” Das stated, “Anchoring inflation is better than it going out of control.”