Mumbai: There are no risks of stagflation in India, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Monday, adding inflation was expected to moderate going forward despite "unimaginably uncertain" global crude oil prices.
"In our assessment such (stagflation risk) prospects don't exist," Das said at a meeting of the Confederation of Indian Industry. "India is far away from such a grim prospect."
Stagflation refers to a period of inflation coupled with a decline in the gross domestic product (GDP).
The recent geopolitical tensions in Ukraine and Russia have sent oil prices spiralling and raised concerns of a hit to India's economic recovery.
Last month, the RBI's monetary policy committee maintained its accommodative stance and kept the key lending rate at record lows to help the economy recover from the pits of the pandemic even as inflation has inched up.
"The point is if you start initiating a premature demand compression through monetary policy action, then it would be counterproductive," Das said, adding the RBI was supportive of growth.
The central bank said in a bulletin last week the unfolding global developments pose downside risks in terms of spillover from the Federal Reserve's rate hikes to global markets.
Das, however, said on Monday India was "comfortably placed" to deal with any spillovers and there was "reasonable confidence" the RBI will be able to maintain stability of the rupee.
Das said the central bank was closely monitoring crude and commodity prices and would spell out its expectations and roadmap on inflation in the upcoming monetary policy meeting next month.
"I can say with reasonable confidence that we will be able to maintain the stability of the Indian rupee, he said, adding that the RBI's standard policy is to intervene in the foreign exchange market to prevent excessive volatility.
The governor said that the rupee has depreciated by just 0.4 per cent against the US dollar between April 1, 2021 to March 17, 2022.
He said the country's foreign exchange reserves are distributed in various foreign currencies and not just concentrated in just one currency.
We have gold reserves which are also dispersed, partly India and partly outside. So it is quite diversified, he said.
To a suggestion of using a small portion of the reserves to finance requirements of the economy, the governor said it was not advisable.
"Touching the reserves for financing various requirements of the economy is not at all advisable. They (using reserves) are not in the medium-term, forget long-term, interest of any government, not just for India.
"According to the RBI's assessment, I think, India should not do it and therefore we are not in favour of it," he said.
(With inputs from Reuters and PTI)
