Reducing core inflation key to easing prices, says RBI’s Shashanka Bhide

A decline in core inflation pressures is critical for moderating price gains and returning them to the Reserve Bank of India’s 4 per cent midpoint, said a rate-setter at India’s monetary policy panel.

The pass through of higher input cost pressures in overall prices may not be complete yet, said Shashanka Bhide, an external member, adding that rising demand “however modest and uneven” in the absence of productivity improvements will stoke prices.

The comments come after policy makers have trained their eyes on elevated core inflation amid easing consumer prices. Core inflation, calculated after stripping out volatile food and energy prices, has stayed above 6 per cent for 14 months in a row, while retail inflation cooled to 5.88 per cent in November.

“Bringing down core inflation pressures is crucial in the overall context,” said Bhide in the interview Monday.

Easing commodity prices and slowing demand will cool prices, but a weak rupee and the ongoing Russia-Ukraine conflict are a concern, he said.

The RBI has raised its policy repurchase rate by 225 basis points since May, including three half-point moves, to tame price gains. “We need to be looking at moderate inflation on a sustained basis,” Bhide said.


“We need to be moving to the target inflation rate keeping in view the impact of the cumulative policy actions and also the growth trajectory,” he said. His colleague in the panel Jayanth Rama Varma said in another interview that excessive rate tightening was risking India’s growth.

Here are other key comments from Bhide:

  • Long-term foreign investment would depend upon the country’s medium-term growth prospects and “how the policies are enabling investments”
  • The implications of a new surge in Covid in China are negative globally. “However, we are better prepared and equipped now than two years back,” said Bhide
  • The end of the war will be a positive factor, but “the policy focus on inflation should continue”

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