Inflation set to lower in a year, notes Ashima Goyal, patting govt, RBI

Inflation was expected to come down over the year, RBI Monetary Policy Committee (MPC) member Ashima Goyal said on Sunday. She asserted that the government’s supply-side action coordinated with a flexible inflation-targeting regime had kept the rate of price rise lower than that in other countries. Ms Goyal added that India had successfully dealt with “pluri-shocks” over the past three years, showing considerable resilience.

“Inflation rates are expected to come down over the year. Government supply-side action coordinated with a flexible inflation targeting regime has kept Indian inflation rates lower than other countries and our own past averages even in this period of major adverse external supply shocks,” she told the PTI in a telephonic interview. She was asked whether high inflation had become the norm in India. 

“Since nominal policy rates rise with inflation to maintain an expected real positive rate under inflation targeting, this prevents demand over-heating and anchors inflation expectations,” she noted. 

Ms Goyal said that policy rates had been cut steeply during the pandemic, and so, they had to be raised fast after recovery was established. 

“But policy rates must not rise too much at present because of slowing external demand. Domestic demand must be allowed to compensate,” she emphasised. 

According to Ms Goyal, as long as the expected future real policy rate does not rise much above unity, the RBI is not over-tightening. 

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