India c bank gov says priority is inflation, but growth important

The Reserve Bank of India's primary focus is to bring inflation down closer to target but it cannot disregard the concerns around growth, governor Shaktikanta Das told newspaper Economic Times in an interview published on Friday.

"We are committed to containing inflation. At the same time, we have to keep in mind the requirements of growth. It can't be a situation where the operation is successful and the patient is dead," Das said.

"We will have to bring down inflation and we can't afford such a big growth shock which will adversely affect inflation. It has to be a balanced call with inflation control as priority," he added.

Consumer price index-based inflation rose more than expected to 7.79% in April, an eight-year high, remaining above the RBI's 2%-6% tolerance band for a fourth consecutive month.

The RBI chief said "our primary focus at the moment is to bring down inflation closer to the target", which is set at 4% over the medium term.

The next policy action would be dependent on the inflation forecast set by the monetary policy committee (MPC) at its June meeting based on developments over the last month and how they affect the outlook, Das said.

India on Saturday announced a series of changes to the tax structure levied on crucial commodities in a bid to insulate consumers from rising prices, following a 40-basis-point rate increase by the MPC earlier in May.

Das said all the government's measures to contain inflation and recent geopolitical developments will be factored into the inflation projections.

India's economic recovery from the Covid-19 pandemic likely stumbled again to 4% in the January-March quarter, a Reuters poll showed. 

The MPC decision will be announced on June 8, with most economists expecting another rate increase.

"Our growth scenario looks far more comfortable and better than other countries. Anchoring inflation is more important, otherwise it will go out of control," Das said.