Indian central bank chief says inflation moderating, but upside risks require vigilance

WASHINGTON – Reserve Bank of India Governor Shaktikanta Das said on Friday the country’s inflation is moderating, but the central bank will be vigilant to risks of an overshoot from unexpected weather-related and geopolitical events.

India’s economy is expanding at a solid clip with the balance of growth and inflation “well-poised,” Das said in an event hosted by the Peterson Institute for International Economics in Washington.

The economy’s resilience has given India’s central bank scope to focus on taming inflation and keeping it around its 4% target, said Das, who spoke as finance chiefs were meeting in Washington for the International Monetary Fund and World Bank annual meetings.

While the central bank sets a 2% band both up and down around its 4% inflation target, it strives to align inflation to 4% and keep it “as close as possible” to the target, he said.

“Inflation is moderating in India. But we can’t take it for granted” due to upside risks that could arise from unexpected weather that affects crops, geopolitical events and supply bottlenecks, he said.

“Overall, the financial sector remains sound and resilient,” he said. “But we are certainly not complacent amid a rapidly changing environment.”

(Reporting by Leika Kihara; Editing by Paul Simao)