Inflation increased to 7.4 percent in July due to vegetable prices, now prices are falling, statement of Shaktikant Das

Pankaj Prasad
RBI Governor Shaktikanta Das
RBI Governor Shaktikanta Das

RBI Governor Shaktikanta Das says inflation rose to more than 7 percent in July due to vegetable prices.

Reserve Bank of India (RBI) Governor Shaktikanta Das has said that the Reserve Bank is conscious of the impact of the second round of inflation. He is also trying to bring down the inflation rate to four percent. To this end, the central bank will keep an eye on risks as recurring global supply shocks can have a strong impact on managing the price situation. He also said that the period of low, stable inflation helped households and business sectors to make their long-term savings and investment plans. Shaktikanta Das, speaking at the Delhi School of Economics, also said that inflation reached 7.4 percent in July due to rising vegetable prices. Now the prices of vegetables have started decreasing.

Das further said, RBI is cautious to ensure that other effects such as normalization and persistence are not allowed to dominate with respect to inflation. The central bank has the responsibility of keeping inflation at four percent plus or minus two percent. Recurring episodes of food price shocks pose a risk to the stabilization of inflation expectations. Inflation has remained at a high level since February 2022. We will keep an eye on this aspect also.

Sustained and timely supply-side intervention by the government is critical in limiting the severity and duration of such food price shocks, Das said. In these circumstances, it is necessary to act in a timely and appropriate manner while being alert to any risks to price stability.

We are still determined to bring down the inflation target to 4 percent, he said. However, we cannot give any time limit for this. A sharp rise in vegetable prices had pushed retail inflation to a 15-month high of 7.4 per cent in July.

RBI planning to expand CBDC as a token for call money market

At the same time, it has also emerged that the RBI is planning to expand the CBDC as a token for the call money market. RBI sources said that RBI is now planning to go into the interbank loan market. In such a situation, the purpose of Wholesale CBDC is to try different technologies. It is relatively easier for a wholesale pilot to experiment with the technology, sources said.

In the Union Budget 2022-23, Finance Minister Nirmala Sitharaman had announced the launch of a digital currency called Central Bank Digital Currency (CBDC). Later with the passage of the Finance Bill 2022 necessary amendments were made in the relevant section of the RBI Act, 1934. Explain that CBDC is an electronic form of sovereign currency. It will not earn any interest like cash, but it can be converted into different forms of cash.

Recently RBI has started pilot project Wholesale CBDC. For this, nine banks - State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC have been selected.