Stable inflation bedrock for sustained growth: RBI Governor Shaktikanta Das

He, however, said that the resilient growth in India has given the RBI the space to focus on inflation to ensure its durable descent to the 4 per cent target. The government has given the RBI the target to maintain inflation in the 2-6 per cent band. The RBI has been focussing on maintaining CPI print at 4 per cent on a durable basis.

The Consumer Price Index (CPI) accelerated to a 14-month high of 6.21 per cent in October, compared to 5.5 per cent in September.

The recent “State of the Economy” article published in the November bulletin of the RBI also said that there was a need to bring inflation down in order to help India meet its potential.

“All that is needed is get inflation down so that India reconnects with its potential,” the article said.

The Governor stated that price stability is just as crucial as growth to enable economic agents to plan ahead, reduce uncertainty and inflation-risk premiums, and encourage savings and investment. These all will provide a boost to the potential growth rate of an economy.

“In the long run, price stability supports sustained high growth. Price stability is also important because high inflation is disproportionately burdensome on the poor,” Das stated.

Das further said that fiscal and monetary coordination can play an important role in managing the balance between growth and supply-driven inflation.

The Indian experience in managing supply-side inflation through effective fiscal-monetary coordination could be a learning template for all central bankers from the Global South, he stated.