The Reserve Bank of India (RBI) Governor Shaktikanta Das on Monday said that the central bank and the monetary policy committee see no fears of stagflation in India. Das added that the MPC has sufficient cushions from inflation target of 4 per cent +/- 2 per cent annually, however, inflation has to be watched over quarters.
Already retail inflation has risen to 6.07 per cent in February, crossing the upper band of the Parliamentary mandate. This is the second consecutive month in 2022 when retail inflation has crossed the 6 per cent mark having hit 6.01 per cent in January. The previous high was 6.26 per cent in June 2021.
Stagflation or recession-inflation is a situation in which prices rise too high but the economy slows or falls into a recession like situation and also unemployment jumps.
Das, while addressing an industry meet organised by CII, said that the RBI will continue to ensure adequate liquidity to support the economy, which is facing many headwinds in the form of soaring crude oil and key commodity prices following the Russian invasion of Ukraine.
He said since the pandemic-hit the economy in March 2020, the central bank has pumped in a whopping Rs 17 lakh crore into the economy and assured the industry that the RBI will continue to ensure that the economy is well oiled with funds.
The governor further said banks at the system level are in better health now with the capital adequacy ratio at 16 per cent, and gross NPAs falling to a record low of 6.5 per cent.
He said despite the headwinds arising from the Russia-Ukraine war, the economy is better placed given the high forex reserves and low current account gap.
''We are comfortably placed to deal with any challenges with regard to financing the CAD, and the RBI stands committed to deal with any challenges on this front,'' he said.
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