RBI Deputy Governor HR Khan has cautioned regarding early celebrations over fall in inflation. Addressing a CII-CFO summit in Mumbai today, Mr. Khan said inflation still has a long way to go. He said that apart from many geopolitical issues, there are structural issues like input costs, wage burden, food prices and protein-driven inflation which are still causing wider inflation pressures. RBI has set a retail inflation target of 8 per cent for next January and 6 per cent a year later. Price index continued its fall in September when it came down to 6.47 per cent. Mr. Khan, however added that India can be "cautiously optimistic" on the domestic front as growth sentiments are good and the savings-investment equilibrium is also improving. He specifically mentioned factors like a stable government which is making attempts at structural reforms as "encouraging" factors.
At the same time, the RBI deputy governor expressed the need to be careful about any social unrest or security threats, including physical and cyber that can hamper growth.Mr. Khan noted that India is fully integrated with global economy and hence, exposed to volatility caused by changes in monetary policies by advanced economies like Japan, the EU and the US. He said that India does not has much luxury of looking at an unconventional monetary policy as the country is hostage to what the advanced countries do in terms of their monetary policies.
