India vulnerable to recurring, overlapping food price shocks: RBI chief
Business
Rice stocks around double the target; Surplus indicates comfortable supplies for domestic market
MUMBAI/NEW DELHI (Reuters) – India is vulnerable to "recurring and overlapping" food price shocks despite the recent moderation in inflation, the governor of the Reserve Bank of India (RBI) said on Thursday.
"In these circumstances, monetary policy remains watchful and actively disinflationary to progressively align inflation to the target, while supporting growth," Shaktikanta Das said in a speech delivered in Japan.
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 4pc target.
The central bank, which has kept the key policy rate unchanged over the last four meetings, expects inflation to average at 5.4pc in fiscal year 2023-24, a moderation from 6.7pc in the last fiscal year.
Governor Das had said in early October the central bank remains highly alert and prepared to take steps to align inflation to the target.
Retail inflation data for October is due Nov 13.
The recent developments in West Asia have added to the "litany of challenges" for the global economy, the RBI chief said on Thursday, adding that the central bank has bolstered foreign exchange reserves to deal with potential eventualities.
India's growth remains on track, and its current account deficit "eminently manageable", while the balance sheets of banks and corporates are healthy, the RBI governor 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.
RICE STOCKS
India's rice stocks were around double its target at the start of November, government sources in the world's second-biggest producer country said on Thursday.
Coupled with the new season crop that has started trickling into the market, the surplus indicates comfortable supplies for the domestic market.
India, the world's biggest rice exporter, in July ordered a surprise halt to non-basmati white rice exports, its largest category, driving global prices to multi-year highs.
Indian rice stocks, including unmilled husk varieties at state warehouses, totalled 19.7 million metric tons, the sources told Reuters.
State-run warehouses must have 8.2 million metric tons of rice for the quarter beginning Oct. 1, according to local government rules. State warehouses must hold an extra 2 million metric tons of rice as strategic reserves.
Indian farmers start planting summer-sown rice in the rainy months of June and July and start harvesting the crop in October.
New season purchases by India's state-run Food Corporation of India, the main state-run grain buyer, would bump up rice inventories at state granaries.
But India's new season rice crop is expected to drop this year due to an uneven monsoon.
Output could fall as much as 8pc from last year's record despite an increase in area under rice paddy.
Wheat stocks at state warehouses totalled 21.6 million metric tons, more than 23% than the state-set target.
Surplus wheat stocks would help the government offer more stocks to bulk consumers such as flour millers and biscuit makers to cool prices, the sources said.
The government has been selling wheat on the open market to control prices that have reached their highest in nearly eight months.
After weather conditions threatened to curtail wheat output, India, the world's biggest producer of the grain after China, last year banned exports of the staple.
