RBI sees El Nino challenge to food inflation this year

Mumbai: Governor Shaktikanta Das has said the Reserve Bank of India (RBI) will strive to get headline inflation to its four per cent target, but flagged El Nino as a challenge to its efforts. In an interview, Das exuded confidence that the economy will grow at 6.5 per cent in FY24, as estimated by the RBI earlier. The central bank’s rate hikes by a cumulative 2.50 per cent since May last year, coupled with supply-side measures from the government, have helped get the inflation down to 4.25 per cent in May from a peak of 7.8 per cent in April last year, Das said.

“We continue to be watchful on the inflation front. We expect inflation to be at 5.1 per cent in FY24, and we will continue to strive and get it down to 4 per cent,” he added. On the high borrowing costs, Das said interest rates on loans may have a direct relation with inflation, and if inflation cools down on a durable basis, people can expect lower interest rates on loans. The governor explained that the Russia-Ukraine war, which led to a shoot-up in the commodity prices, led to a surge in inflation, but added that crude prices are not a concern from an inflation perspective now as they’ve come down to $76 a barrel. Food inflation has also come down, Das said, adding that measures like the Food Corporation of India releasing wheat and rice stocks have also helped. Targeted cuts in duties on certain products have also helped, he added.