Inflation to stay within band: RBI deputy governor Poonam Gupta

MUMBAI: RBI deputy governor Poonam Gupta stated that India's inflation is expected to remain within the target band, unlike many advanced economies where inflation has exceeded targets and may necessitate higher interest rates. She also indicated that there is potential for the rupee to strengthen from its current levels, as projected by analysts due to a special scheme that attracted over $133 billion in non-resident deposits.

Addressing the SBI Banking and Economics Conclave, Gupta remarked that advanced economies are currently operating nearly double the inflation targets set by them. The United States, for instance, was nearing a 4% inflation rate. In contrast, Gupta asserted that India is currently in a better position to navigate through the current crisis.

Gupta cautioned that nations would respond differently to shocks based on their unique circumstances. She emphasized that India had faced a broader range of shocks than most emerging economies over the past 18 months, including high US tariffs, disruptions in oil supplies, El Nino, and capital outflows linked to the global AI boom.

Despite these challenges, the economy had largely remained unscathed and may have even strengthened structurally. India's growth rate was the highest among its peers, while inflation remained contained, fiscal consolidation continued, and the financial sector had become more resilient, Gupta explained.

Additionally, Gupta highlighted India's favorable performance during the energy shock, despite the country's heavy reliance on imports. Unlike many other economies, India experienced little rationing of supplies, which helped prevent panic and minimized the economic impact of the shock. She also noted that India had maintained fiscal prudence by avoiding attempts to stimulate the economy beyond its productive capacity.

The International Monetary Fund (IMF) projects that India's public debt as a proportion of GDP will decline by 5.6 percentage points between now and 2031, compared to most other countries.