Reserve Bank of India (RBI) governor Shaktikanta Das on Thursday said retail inflation remains vulnerable to recurring and overlapping food price shocks.

“In these circumstances, monetary policy remains watchful and actively disinflationary to progressively align inflation to the target, while supporting growth,” Das
said in a speech delivered in Tokyo.

India’s retail inflation eased to a three-month low of 5.02 per cent in September on the back of softer vegetable prices but remained above the RBI’s 4 per cent target.

Retail inflation data for October is due November 13.

The recent developments in West Asia have added to the “litany of challenges” for the global economy, the RBI chief said, adding that the central bank has bolstered foreign exchange reserves to deal with potential eventualities.

Regarding the performance of the Indian economy, Das said it is “a matter of satisfaction” that it has sailed through the turbulent waters smoothly in recent years.

India’s growth remains on track, and its current account deficit is “eminently manageable”, while the balance sheets of banks and corporates are healthy, the RBI governor said.

“Driven by its inherent dynamism and supported by a prudent policy mix, growth is getting a stronger foothold while inflation is also coming under control. Our economic performance also owes a lot to the very calibrated, focused and targeted monetary and fiscal responses since the pandemic,” the governor said.

He said in the current uncertain environment, it is best to avoid any sense of complacency.

“We remain agile and continue to fortify our macroeconomic fundamentals and buffers. Today, the confidence and trust in India’s prospects are at an all-time high,” he said.

Meanwhile, a linkage of India and Japan’s fast payment systems may be explored to make cross-border payments more efficient and less costly, the governor said.

Das said UPI has played a phenomenal role in the fintech revolution in India.

“Linking of UPI with fast payment systems of other countries is also being undertaken. Linkage of fast payment systems of India and Japan may also be explored to leverage the power of fintech and make cross-border payments more efficient and less costly,” he said.

With inputs from Reuters