-- Sign up for the India Edition newsletter by Menaka Doshi – an insider's guide to the emerging economic powerhouse, and the billionaires and businesses behind its rise, delivered weekly.The Reserve Bank of India struck a hawkish policy tone on Friday, saying inflation remains uncomfortably high and it may take measures to absorb excess cash in the market to keep price pressures under control.
“I would like to emphatically reiterate that our inflation target is 4% and not 2%-6%,” Das said. “Our aim is to align inflation to the target on a durable basis, while supporting growth.” The move “came as a warning to markets that they want to keep tight liquidity to control inflation,” said Venkatakrishnan Srinivasan, founder at Rockfort Fincap.By continuing its hawkish rate hold, the Reserve Bank of India is striking the right balance between supporting growth and buffering against the risk of additional Federal Reserve hikes and higher oil prices.
The RBI retained its inflation forecast of 5.4% for the year ending in March, and also kept its outlook for growth unchanged at 6.5%.