Reserve Bank Governor Shaktikanta Das said on Thursday that periodic food price shocks and heightened geopolitical tensions pose problems in combating inflation.
"We stay watchful in navigating the last mile of disinflation, which is frequently the most difficult portion of the voyage. "We are confident that stable and low inflation will serve as the foundation for long-term economic growth," the governor stated.
Das emphasized the importance of stable and low inflation as a foundation for long-term economic prosperity. In his keynote talk at the 59th SEACEN Governors' Conference, he stated that India has effectively traversed many hurdles to emerge as the fastest-growing big economy.
"Prudent monetary and fiscal policies have laid the way for India's success in navigating these challenging waters. The Reserve Bank expects the Indian economy to increase by 7.0% in 2024-25, the fourth consecutive year of growth at or over 7%," he said.
Das went on to say that inflation has slowed since its peak in the summer of 2022. Retail inflation, which the RBI primarily considers when determining its bi-monthly monetary policy, is approaching its objective of 4%, with the January figure at 5.1%.
He emphasized that reoccurring food price shocks and rising geopolitical tensions pose difficulties to the ongoing disinflation process.
He spoke about 'Fundamental Shifts in the Global Economy': New Complexities, Challenges, and Policy Options'. The governor observed that India's unified policy response to a succession of unfavorable shocks could serve as a model for the future.
While monetary policy worked to stabilize inflation expectations and reduce demand-pull pressures, the government's supply-side initiatives relieved supply-side pressures and tempered cost-push inflation. Effective fiscal-monetary coordination was at the heart of India's success, he said. The governor stated that the world economy is at a crossroads, with lots of problems but also fresh opportunities.
"Together, the path we choose from here will determine our future fate. We need policies that are responsive to the new realities of the global economy. In an unpredictable world, central banks must be proactive to better serve the goals of pricing and financial stability," he stated.
He stated that while the global economy's prospects for a gentle landing have improved, there remain other difficulties ahead, including uncertainties. In his speech, he proposed five potential policy options for the global economy's future direction as new realities emerge in the coming years.
"Our sustained engagement in the India Stack and the Unified Payments Interface (UPI), especially during the pandemic and thereafter, has given us the confidence that digital public infrastructure can become a critical part of global public good when scaled up beyond national boundaries," the secretary of state said. The linkage between the Indian UPI and a few other nations' quick payment systems highlights the UPI's potential to become an international model for cross-border payments, he noted.
Das stated that SEACEN, as a platform for the region's central banks, provides a useful forum for sharing insights and developing collaboration in a variety of areas to promote progress and prosperity. He stated that international collaboration should take into account the concepts of comparative advantage and resource endowments so that we can all benefit. The Reserve Bank of India is now Chair of the SEACEN (South East Asian Central Banks) Forum.
