The central bank projects lower FY23 inflation, saying its characteristics are different from the West. Equities and bond markets are cheering the bank's calibrated moves. Economists say a rate hike is quite some time away
Shaktikanta Das said global central banks had domestic inflationary pressures which were different from those faced by India. India’s food inflation is estimated at around 3 percent while in the US, it is near 6.5 percent
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The Reserve Bank of India (RBI), in a move distinctly different from global central banks, on Thursday kept key interest rates unchanged and did not alter its “accommodative” policy stance. The central bank also forecast retail inflation at 4.5 percent for FY23, expecting it to ease sharply from the 5.59 percent level seen in December last year.
The lower inflation projection is not only surprising, but also optimistic considering that crude oil and several global commodity prices continue to rise. India meets about 85 percent of its crude oil demand through imports. A surge in oil prices not only hurts ‘import inflation’, but could also threaten to derail the fiscal deficit target which the government has pegged at 6.4 percent for FY23.