RBI has to navigate its path towards the 4% inflation target with a “clear and unambiguous focus and (its) commitment to bring down the inflation to 4% cannot be any wavering,” Das said in a speach at the Annual General Meeting of local industry lobby group Bombay Chamber of Commerce and Industry.
“Inflation is moderating, but moderating at a slow pace. We are still at 4.7% in striking distance of 5% one serious weather event, …prices may go up and we will be at 5%….There cannot be any distractions at this stage, because any distraction will severely compromise growth. Like in the game of chess if you make one wrong move, you can lose the game, it is similar when you are dealing with the challenge of inflation,” Das said.
Das said India is at the threshold of a major structural shift in its growth trajectory, moving towards 8% GDP growth in a sustained manner, but stable inflation is at the core of long term sustainable growth.
“The outlook for the current year looks very optimistic and we are very sanguine about the fact that India will record 7.2% growth.
A good growth outlook gives us the necessary space to completely unambiguously focus on inflation,” Das said.
Just like the RBI is sanguine growth it is also sanguine about achieving its 4% inflation target down the road.
“We have given our predictions. Our average inflation in the last quarter that is January to March is likely to be in the order of about 4.6%. Again illustrating one single weather event of serious nature, we will be touching 5% so that easily. Therefore, we are completely focused on price stability, we focus on controlling inflation, because it is in the interest of our long term goal,” Das said.
Das said research and detailed studies have shown that at 4% inflation India’s economy will be far better place with growth drivers will be able to sustain themselves.
“High inflation makes the economy uncompetitive make the economy unfavorable destination for both domestic as well as for foreign investment. Above all, a high inflation would mean weakening the purchasing power of the people, especially the poor people. When the country grows naturally every section of the society every section has to grow irrespective of whether they are rich or poor. So inflation in that thing, if it is maintained that the targeted level, you know, ensures the stability of your growth trajectory,” Das said.
Das said expectations of a good monsoon, stronger international trade, improvement in manufacturing and industrial production and a pick up in private capex all point to more sustainable growth.
But a large country like India cannot depend on a single sector, whether manufacturing or services or export led growth.
“A large economy like India, the growth story has to be sustained by multiple sectors. Whether manufacturing or services or export led growth or whatever it has to be a multiple sector driven growth story for India,” Das said.
