Inflation expected to come down over the year: RBI MPC member Ashima Goyal
The Hindu
RBI MPC member Ashima Goyal said policy rates had been cut steeply during the pandemic, so they had to be raised fast after recovery was established
Inflation is expected to come down over the year, RBI Monetary Policy Committee (MPC) member Ashima Goyal said on March 12, asserting that the government's supply-side action coordinated with a flexible inflation-targeting regime has kept the rate of price rise lower than that in other countries.
Ms. Goyal said that India has 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 PTI in a telephonic interview. She was asked whether high inflation 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 policy rates had been cut steeply during the pandemic, 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, RBI is not over-tightening.