English Article

Inflation and Growth

Inflation has peaked, focus is on growth.

Headline retail inflation has peaked and will ease from hereon, RBI Deputy Governor Michael Patra said on Wednesday, terming criticism about the central bank being behind the curve on inflation ‘unfair’ as the economy was still coping with output and livelihoods lost to the pandemic. “We have dug out of the deepest recession in the world and 2021-22 is estimated to close with a GDP growth rate of 9.2%, but most people don’t focus on the fact that at this rate of growth, India is only 1% above pre-pandemic levels of GDP,” he said. As the economy was already in a cyclical downturn before the COVID-19 lockdowns, he noted that India had lost at least 10-15% of output ‘forever’. “Inflation is a case of statistical effects in India. And if you look at the momentum, it is actually declining, so India is in a comfortable position… we have the headroom to support growth. And we will do so because we are dealing with lost output, lost livelihoods. So I think it is an unfair judgment,” Mr. Patra asserted at a discussion with the central bank governors of the Philippines and Sri Lanka. “ But RBI reserves the right to choose it’s time to normalise,” he added at the Asia Economic Dialogue 2022, hosted by the Ministry of External Affairs and the Pune International Centre.