Caution, vigilance needed on inflation front: Patel
MUMBAI: India’s recent success in containing inflationary pressures needs to be viewed in the context of entrenching macroeconomic stability, in which the government played a decisive role as it managed price pressures in some key food items, said Urjit Patel, governor of the Reserve Bank of India (RBI).
The new monetary policy framework has been playing an important role in shaping inflation expectations and outcomes, Patel said in a speech on December 7 at the Centre for Advanced Financial Research and Learning.
The speech was uploaded on RBI’s website on Friday.
“With some disinflation underway, inflation expectations are, perhaps, getting re-anchored, indicative, in part, of the credibility earned by the new framework; but these are early days, and hence considerable caution and vigilance is warranted on the inflation front,” Patel said.
Last week, RBI’s monetary policy committee kept the central bank’s key interest rate unchanged, noting risks to inflation.
On growth, Patel said eco- nomic slowdown may well be bottoming out, as seen from the second-quarter gross domestic product(GDP) growth numbers.
“If one sees far, structural changes that come with temporary disruptions can be growth and efficiency-augmenting in the medium to long term. This is what has happened, for instance, with the introduction of the GST. It should yield gains that will mean better tax compliance and a more efficient tax system that in turn will impart a permanent upward push to our growth,” he said.
After five consecutive quarters of deceleration, GDP growth quickened to 6.3% in July-September.