RBI Governor Shaktikanta Das: India’s disinflation process to be slow, protracted

Days after the RBI monetary policy committee's decision to pause the repo rate hike for a second time, RBI governor Shaktikanta Das explained the rationale of the pause. The governor said the disinflation process in India will be slow and protracted, with the 4 per cent inflation target likely to be met only over the medium term.

"The cumulative impact of our monetary policy actions over the last one year is still unfolding and yet to materialise fully," Das said in a speech at the Summer Meetings organised by Central Banking in London. "While our inflation projection for the current financial year 2023-24 is lower, at 5.1 per cent, it would still be well above the target," he added.

In the recent monetary policy committee, RBI left its key interest rate unchanged for a second straight policy meeting but signalled that it wants to see inflation moderate more while keeping an eye on the monsoon.

Barring the recent pause, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation.

Latest data showed India's annual retail inflation cooled to a 25-month low at 4.25 per cent in May from 4.7 per cent in April, but analysts expect prices to remain sticky in the coming months.