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The Reserve Bank of India (RBI) Governor Shaktikanta Das has said the disinflation process in India will be slow. He said ‘As per our current assessment, the disinflation process is likely to be slow and protracted with convergence to the inflation target of 4 per cent being achieved over the medium-term’. In remarks that came a day after official data suggested a cool-down in headline inflation to 4.25 per cent for May, Das said there have been signs of some softening in inflation in recent months, with the consumer price inflation coming down from the 7.8 per cent peak in April 2022.

He said the RBI’s inflation projection for the current financial year 2023-24 is lower at 5.1 per cent, but reminded that the number will still be above the 4 per cent target. The rate-setting panel has eschewed from providing any future guidance on the timing and level of the terminal rate recognising that explicit guidance in a rate tightening cycle is inherently fraught with risks. He said the RBI is mandated to maintain price stability while keeping in mind the objective of growth, and added that the central bank cannot be oblivious to growth concerns, given the high population and the necessity to reap the demographic dividend.

He noted that the RBI prioritised growth during the pandemic years even as inflation remained above the target but within the tolerance band. The Monetary Policy Committee prioritised growth over inflation at the height of the pandemic during 2020 and 2021, given the frail economic conditions and notwithstanding intermittent inflationary pressures from supply shocks. He further said in FY24, the RBI is estimating real GDP growth to come at 6.5 per cent and India will remain among the fastest-growing large economies in 2023 in all likelihood.

He welcomed the government’s continued thrust on capital expenditure, which is creating additional capacity and nurturing the much-awaited revival in the corporate investment cycle. He said the RBI has taken a slew of measures on the regulatory and supervisory front as well. These include a supervisory strategy which has seen a unification of supervisory architecture, ownership-agnostic and risk-focused supervision and a shift from episodic to continuous supervision. He noted without interfering with business decision-making at banks, the RBI has done a deep dive into the business models of banks and other lending entities and closely monitors their asset-liability mismatches and funding stability.