: ‘Escalation of geopolitical tensions biggest risk to growth’ #FinanceIndia #StockMarketNEWS #Business RBI member says high inflation will certainly not become the ‘norm’ New Delhi: The

@StockMarketNEWS Tue 30 Aug, 2022

Posted in: #FinanceIndia #StockMarketNEWS #Business

‘Escalation of geopolitical tensions biggest risk to growth’ #FinanceIndia #StockMarketNEWS #Business
RBI member says high inflation will certainly not become the ‘norm’

New Delhi: The biggest risk to India’s growth outlook is an escalation of geopolitical tensions, especially if these tensions spread to the Asian region, RBI Monetary Policy Committee (MPC) member Jayanth R. Varma said on Wednesday.

Varma, said that inflation and inflationary expectations appear to be moderating and high inflation will certainly not become the ‘norm’ in the country.

He is cautiously optimistic about the Indian economy as after the pandemic abated, consumption demand has begun to recover though the recovery is uneven across sectors and industries.

“Capacity utilisation has been inching up, and is now approaching levels at which business will have to seriously consider capital expenditure for expansion,??? Varma added.

He further noted that the MPC is determined to bring inflation down close to the target rate of 4% as quickly as possible without imposing intolerable costs in terms of economic growth.

“I would like to emphasize that high inflation will certainly not become the norm in India,??? he said.

The Reserve Bank in its latest MPC meeting in August had decided to increase the benchmark lending rate by 50 basis points to 5. 40% to quell inflation.

The central bank has been tasked by the government to ensure that retail inflation remains within the range of 2-6%. “By helping maintain credibility of monetary policy, the inflation targeting regime proved its worth in confronting both these shocks,??? Varma, currently a professor of Indian Institute of Management (Ahmedabad) said.

According to him, transitioning rapidly from a growth shock to an inflation shock was a severe and unexpected challenge. “It is true that inflation has stayed above the upper tolerance band for too long, and this would have to be addressed in the ensuing months. ??? he opined.

“Finally, inflation and inflationary expectations appear to be moderating (both in India and globally) and this would reduce one of the major headwinds for the Indian economy,??? Varma noted.

Retail inflation based on Consumer Price Index (CPI) eased to 6. 71% in July but remained above RBI’s tolerance level for the seventh month in a row. The Reserve Bank had projected retail inflation to average 6. 7% in 2022-23.

Turning to the negative side, he observed that in the current global environment, exports might not be as buoyant as they were in the past and said while India is not an export-driven economy, an export slowdown would be a drag on growth, if it is sustained.

“The biggest risk to the growth outlook is that of an escalation of geopolitical tensions especially if these tensions spread to the Asian region,??? he said.