Inflation to ease to 4% by FY24: RBI Deputy Guv Michael Patra

The economy has shown resilience and is now coming back on track after the disruption caused by the pandemic.

  • Money9
  • Updated On - September 17, 2021 / 12:42 PM IST
Inflation to ease to 4% by FY24: RBI Deputy Guv Michael Patra
RBI would maintain an accommodative stance till it is necessary to ensure enough liquidity in the system.

The Reserve Bank of India (RBI) deputy governor Michael Patra has stated that India is likely to witness a gradual easing of inflation, and the monetary policy ahead will be determined by the inflation and growth outlook. Patra said that with a smooth approach, the inflation will be down to 5.7% or lower in FY22. It will be below 5% in FY23 and near to the target of 4% by FY24. On markets seeking assurance on RBI’s accommodative stance and reassessing it, he said that RBI would maintain an accommodative stance till it is necessary to ensure enough liquidity in the system. He added that the Central banks absorb over Rs 9 lakh next surplus on a daily basis. “We don’t like tantrums. We like tepid and transparent transitions — glide paths rather than crash landings,” Patra said.

Pandemic and economy

The economy has shown resilience and is now coming back on track after the disruption caused by the pandemic. The manufacturing has shown broad-based recovery but the output is still below pre-pandemic levels.

“GDP outcome for the first quarter coming in just a shade below the RBI’s forecast, the projection of growth of 9.5% for the year as a whole appears to be on track,” said Patra.

Supply shocks persist

On price rise, Patra said that due to supply shocks the inflationary pressures exist. “Although shocks of this type are typically transitory, the repetitive incidence of shocks is giving inflation a persistent character,” he added. The economy is also kept in check from deflation through FIT (flexible inflation targeting). It adopts a positive lower bound rather than zero. The economy is also considered in terms of average instead of pints in India. So the target that is set for inflation has to be reached in a period of time. He said that when there is a deviation in inflation from the tolerance band for three consecutive quarters, the MPC needs to address its shortcoming.

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