New Delhi : Sounding a clear note of caution on rising crude oil prices pushing inflation, Chief Economic Advisor (CEA) Arvind Subramanian has toned down his earlier vocal expectation of a rate cut by the Reserve Bank of India (RBI) ahead of the central bank’s final bi-monthly monetary policy review of the fiscal due to be annouced next week.
In an interview with CNBC TV18 following the release of the Economic Survey 2017-18 authored by him, Subramanian said that with retail inflation edging past the RBI’s median target of 4 per cent, the “cycle has turned.” “Relative to the last 18 months when we consistently undershot our inflation target, now we are at or close to that. So clearly, the case for easing is now less persuasive…we seem to be close to the inflation target,” he said. At the fiscal’s penultimate policy review in Mumbai last month, the RBI maintained the status quo on its key lending rate for the third time in succession at 6 per cent, citing concerns on the rising trajectory of inflation. The central bank also raised the inflation forecast for the remainder of the current fiscal to 4.3-4.7 per cent. The continuing rise in food and fuel prices pushed India’s annual retail inflation rate over the five per cent mark in December, to 5.21 per cent, from 4.88 per cent in November. In this connection, the CEA hinted that the union government’s fiscal deficit target of 3.2 per cent of the gross domestic product (GDP) could be exceeded this year in the lead up to the 2019 general elections.