Mumbai: Shows a gradual approach to policy normalization, Deputy Governor of the Bank of India (RBI) Michael Patra said on Thursday that inflation is expected to loosen 4% – the lower end of the tolerance ribbon – only with FY24.
Marking the market on a sustainable accommodation of the RBI, Patra said that the attitude of “during” the accommodation needed was reflected in sufficient liquidity in the system, with a clean surplus from near Rs 9 Lakh Crore absorbed by the central bank in the daily.
base.
Patra spoke on the 12th edition of the financial market summit organized by the CII Industrial Agency.
“The Glide Line which is estimated to have to take inflation to 5.7% or lower in FY22, becomes below 5% on FY23 and is closer to the 4% target by FY24.
Rebalancing the liquidity conditions will be in accordance with this glide path, but the selection of instruments It is best told to assess the RBI with a considerable experience with sete-appil, “said Patra.
“The market, however, constantly reassures this attitude with incoming data and seeks definitive certainty at the future policy level,” Patra said.
“We don’t like tantrum.
We love the warm and transparent transition – the path slid rather than the landing crash,” said Patra.
He said that would be wrong to interpret the Repo Auction level of the central bank variable as a measure of liquidity tightening which refers to surplus funds in the money market.
Patra said that the Indian economy emerged from the second wave in a more resilient way compared to the first.
He added that wider recovery based on manufacturing as a pivot, although the output is still below the pre-pandemic level.
“The results of GDP for the first quarter are only in the shade below the RBI estimate, the 9.5% growth projection for this year as a whole seems to be on track,” said Patra.
Justifying the RBI’s attitude to see through a price nail, Patra said that the inflationary pressure was mostly driven by supply shocks.
Although this type of shock is usually temporary, recurring shock events are “providing persistent character inflation”.
According to Patra, the essence of India’s flexible interest rate targeting policy is to protect growth by minimizing the sacrifice of the output, which is a “price” price stability.
“Symmetrical, fitting (targeting flexible inflation) also protects the economy of deflation by adopting a positive limit – not zero – lower,” he said.
In addition to the double target stability and price growth, Patra said that in India the target of monetary policy was defined in the average rather than as a point.
Also, the inflation target is set to achieve over a period of time than continuously.
Patra said that there was a fairly wide tolerance band around the target to accommodate measurement issues, estimated errors, supply shocks and, as shown clearly recently, black events such as pandemics.
Also in India, MPC’s failure is defined as three consecutive quarters of the inflation deviation of the tolerance band, rather than any deviation from the target.