India's RBI Chief Says Moderation In Inflation, Raises Concerns Over El Nino

Inflation in India has slowed, but persistent weather-related concerns continue to be a drag, according to the governor of the Reserve Bank of India on Wednesday.

"The war on inflation is not over, we have to remain alert," Shaktikanta Das said at an event in New Delhi.

"There is no room for complacency. We will have to see how the El Nino factor plays out."
India's annual retail inflation witnessed a decline, easing to 4.7% in April compared to 5.66% in the previous month, as per the latest data released by the government.

This month's retail inflation data, scheduled to be released on June 12, "could perhaps be lower," Das said.

The RBI's inflation target is 4%, with a tolerance of up to two percentage points either way.

El Nino may not only increase inflation, but it may also slow India's economic growth, according to Das. Geopolitical uncertainty, as well as decreased merchandise trading as a result of global trade contraction, might further stymie growth, he warned.

India's governor expressed optimism about the country's economic growth, stating that the GDP growth for 2022-23 is likely to surpass 7%, which should not be seen as unexpected.

Additionally, he mentioned that India is projected to achieve a GDP growth rate of approximately 6.5% in the following fiscal year of 2023-24.

Das stated that the RBI intends to remain conservative and act on time to guarantee financial stability, to be proactive in foreign exchange management, and to focus on keeping the rupee steady.

The central bank is not aiming for "internationalisation" of the rupee, but it is a process that is ongoing, according to the governor, who added that the RBI is continuously working on it.

According to Das, 17 banks have launched 65 special vostro accounts to enable rupee foreign commerce. A vostro account is one that a local correspondent bank holds on behalf of a foreign bank.

Das noted that the RBI has also granted trade settlement accounts to 18 countries.