Reserve Bank of India (RBI) Governor Shaktikanta Das has said that inflation in the country is "unacceptably and uncomfortably" high. His observation is recorded in the minutes of the Monetary Policy Committee's (MPC) recent meeting published on 18 August. The other members of the MPC had expressed similar views. "Although inflation seems to have peaked, it is still unconscionably high," RBI deputy governor Michael Patra has said.
July's retail inflation dipped to 6.71%, easing for the third month in a row, helped by a slower increase in food and fuel prices but continues to remain above the central bank's mandated target band of 2%-6% for a seventh straight month.
At its meeting from 3 to 5 August, the MPC had decided to increase the benchmark lending rate by 50 basis points to 5.40% with a view to curtailing inflation.
Policy to tackle inflation
The sequence of policy measures, Das said, "is expected to strengthen monetary policy credibility and anchor inflation expectations".
"Our actions would continue to be calibrated, measured and nimble depending upon the unfolding dynamics of inflation and economic activity," the RBI governor said.
"Our monetary and liquidity actions have been aimed at ensuring continued macroeconomic and financial stability that could set the foundation for a high growth trajectory over the medium term," Das noted. "We will continue with whatever-it-takes approach, given the new set of challenges and very high uncertainties that we are confronted with," he said.
The MPC members also noted that the outlook remains highly uncertain, and bringing the retail price rise closer to the target of 4% is essential to help sustain economic growth over the medium term despite signs of inflation having peaked.
The Indian economy is running a positive growth differential vis-a-vis the rest of the world, Patra wrote.
Patra further said that frontloading of monetary policy actions "can keep inflation expectations firmly anchored, re-align inflation with the target and reduce the medium-term growth sacrifice as it is timed into the recovery underway."
Most members sounded optimistic about the country's growth prospects as compared to other global and emerging market economies.