Amidst the waves of economic optimism, the Reserve Bank of India (RBI) finds itself anchored by concerns over inflation, specifically the looming spectre of food price pressures. Its decision to maintain a tight monetary stance reflects a cautious approach aimed at taming the inflationary tempest, with a particular focus on the unpredictable currents of food inflation. Governor Shaktikanta Das paints a picture of an Indian economy displaying “resilience and momentum,” driven by a surprising surge in growth during the July-September quarter. However, this optimism is tempered by the sobering reality of inflation risks, especially in the realm of food prices.

The central bank’s decision to revise the fiscal year growth forecast upward to 7 per cent underscores the nation’s economic prowess but acknowledges the need for vigilant navigation through potential inflationary storms. The persistence of inflation above the RBI’s 4 per cent mediumterm target is evident in the decision to keep the repo rate unchanged at 6.50 per cent for the fifth consecutive meeting. The central bank’s proactive stance, having raised the repo rate by 250 basis points since May 2022, signals a deliberate effort to cool inflation, which dropped to 4.87 per cent in October but is expected to remain above the target for an extended period. RBI deputy governor Michael Patra’s cautionary note on the uncertainty surrounding inflation, particularly in the food sector, underscores the complexity of the challenge. While core inflation, excluding volatile food and fuel prices, has shown signs of moderation, the nearterm outlook is clouded by risks to food inflation.

Mr Das acknowledges this by emphasising that the current economic resilience may be “masked by risks to food inflation.” The central bank’s projection of consumer inflation at 5.4 per cent for 2023-24 remains unchanged, highlighting the lingering concern over inflationary pressures. The RBI’s commitment to maintaining a policy stance of “withdrawal of accommodation” underscores the gravity of the situation, with inflation management not left on autopilot. The decision to keep rates steady is a clear message that any notion of policy loosening is off the table, especially with the uncertainties surrounding food prices.

Economic Affairs Secretary Ajay Seth’s assurance of on-going supply-side measures to tackle food inflation emphasises the government’s dedication to addressing the root causes of the issue. As the Indian rupee experiences a slight weakening and equity markets cautiously hold their gains, it is evident that market participants are closely monitoring the central bank’s strategy in combating inflation, particularly in the food domain. Navigating through the choppy waters of inflation headwinds, the RBI steers India’s economic ship with a watchful eye on the food inflation storm, aiming for a delicate balance between growth aspirations and the need for price stability. As the nation sails through uncertain economic seas, the central bank’s commitment to inflation management becomes the guiding star on the horizon.