Status Quo

With recent geopolitical conflicts, the RBI has been watching inflation with a keen eye. But experts believe the impact of these conflicts has already been factored in

- ANAND ADHIKARI

FROM 'ELEPHANT' TO 'horse'―Reserve Bank of India (RBI) Governor Shaktikanta Das’ outlook on inflation seems to have seen a shift. What was ‘slow moving’ is now ‘agile’ and needs to be kept on a tight leash. What brought about this shift in analogy? According to retail data for September, retail inflation has seen a 5.5% year-on-year jump on the back of an increase in vegetable prices.

“The RBI governor stressed that though the risk of inflation is diminishing in the medium term, multiple factors could impact it in the short term. This stance indicates that the RBI has turned cautious and continues to remain hawkish in the short term to ensure inflation is under check,” says Deepak Ramaraju, Senior Fund Manager of financial services company Shriram AMC. There are numerous factors at play—right from the US Federal Reserve’s shift in policy and rate cut guidance, rising geopolitical tensions, China’s stimulus to arrest economic slowdown, to Japan’s surprise decision to raise interest rates.

But experts are not reading too much into metaphors. “RBI’s tone remains focussed on the growth-inflation balance while keeping its eye on external factors,” says Anitha Rangan, Economist at Equirus, another financial services player.