Inflation formation in India needs to move towards convergence with global inflation: RBI Deputy Governor Patra

According to MD Patra, Deputy Governor of RBI, the formation of inflation in India needs to move towards convergence with global inflation so that both the internal and external value of the rupee (INR) is preserved.

“This will lay the ground for internationalization of the rupee and India’s emergence as a future world economic superpower,” Patra said in his recent address at the Lal Bahadur Shastri National Academy of Administration, Mussoorie.

In its latest GEP (Global Economic Prospects), the World Bank has projected global inflation to moderate to 3.5 percent in 2024. The Reserve Bank of India has estimated CPI (retail) inflation at 4.5 per cent and 4.1 per cent for 2024-25. 2025-26.

global financial center

The Deputy Governor said that as India emerges as an export power backed by a strong manufacturing base, the natural consequence will be full internationalization of the Indian rupee.

“Many factors are already in place. The Indian diaspora is the largest in the world and India is the top recipient of remittances. Indian rupee trade is three times more than that in the coastal region.

“India is expanding local currency settlement arrangements with many countries in Asia and the Middle East and work is underway to link payment systems. Deep and liquid financial markets are developing,” Patra said.

The Deputy Governor said that the International Financial Center at GIFT City in Gujarat is emerging as a global financial and technology hub with a thriving financial ecosystem.

He said the policy emphasis on macroeconomic and financial stability is also positive for the Indian rupee going international.

Patra emphasized that the main function of monetary policy is to form the basis of the Indian economy.

“Short-term fluctuations in aggregate demand have to be actively managed to ensure a broad alignment with the evolving productive capacity of the economy.

monetary policy

“Price stability is the best contribution that monetary policy can make in strengthening the foundation of the expected growth trajectory over the next few decades,” Patra said.

The Deputy Governor stressed that the RBI has lived up to expectations by remaining committed to aligning inflation with the (4 per cent) target and considers the recent easing of price pressures as a work in progress.

“Controlling inflation lays the foundation for sustained high growth in the future by improving consumption conditions, investment outlook and external competitiveness,” he said.