India's Inflation Trajectory Remains Clouded With Uncertainties: RBI Governor

India's inflation trajectory remains clouded with uncertainties arising from continuing geopolitical conflicts, the possibility of further supply disruptions, volatile financial market conditions and domestic weather-related factors, said RBI Governor Shaktikanta Das in the September MPC meeting.

In the minutes of the meeting released on 14 October, Das said that the central bank needs to do whatever is necessary and under its control to restrain the broadening of price pressures, anchor inflation expectations and contain second-round effects.

"The need of the hour is calibrated monetary policy action, with a clear understanding that it is required for sustaining our medium-term growth prospects," said Das.

He added that the monetary policy needs to remain watchful and nimble based on incoming data and evolving conditions. 

"We should remain vigilant on the inflation front while strengthening our macroeconomic fundamentals. The financial and external sectors also continue to be under the Reserve Bank's close watch," said Das.

However, Das said that overall, he remains optimistic about the prospects of the Indian economy, its resilience, and its capacity to deal with current and emerging challenges.

Das stated that the world is in the eye of a new storm originating from aggressive monetary policy tightening, which has resulted in tightening global financial conditions, extreme volatility in financial markets and sharp appreciation of the US dollar.

"Amidst all these, the Indian economy presents a picture of resilience with macroeconomic and financial stability. The balance sheet of key stakeholders like corporates and banks remain strong," Das said.

"However, the Indian economy is obviously impacted by the unsettled global environment. There are pronounced consequences not only for our domestic inflation and growth dynamics but also financial markets," he added.

In the latest policy review that concluded on 30 September, the RBI left its inflation aim for India unchanged at 6.7 per cent for this fiscal year.

Das stated that inflation is expected to remain above the central bank's 6 per cent threshold in the fiscal second half.