Chequered History: How Inflation Fared During Shaktikanta Das's Tenure

Under Shaktikanta Das, retail inflation surged to an eight-year high in 2022, reflecting persistent food and fuel price pressures, significantly impacting India's GDP growth trajectory. (Photo source: NDTV Profit) (Photo source: Pralhad Shinde/ NDTV Profit)

Outgoing Governor Shaktikanta Das's tenure was marked by periods of high retail inflation, primarily driven by fluctuating food prices. Throughout his time in office, Das and his team adhered to the central bank's inflation targeting framework, opting not to reduce the benchmark lending rate, even amid signs of a potential growth sacrifice.

Das, who served as the Reserve Bank of India's (RBI) second-longest-serving governor, took charge in December 2018 when inflation was comfortably below the target range of 4% (± 2%). However, the following year saw a steady increase in retail inflation, largely due to rising food prices. By January 2020, inflation had climbed to 7.59%, with vegetable inflation soaring to 50.19% in January 2020 and 60.5% in December 2019.

The challenges of fluctuating and high inflation persisted into 2022, when retail inflation reached an eight-year high of 7.79% in April, driven by escalating food and fuel prices. In November 2022, the Monetary Policy Committee (MPC) had to communicate with the government, explaining why inflation remained above the tolerance band for more than three consecutive quarters.

Fast forward to 2024, the central bank's inflation woes continue as it targets reining in inflation amidst a slowing economy. While inflation surged above the upper tolerance band of 6% in October, GDP growth in the July-September quarter fell to a seven-quarter low of 5.4%. "Food inflation pressures are likely to linger in Q3 of this financial year and start easing only from Q4FY25, backed by seasonal correction in vegetable prices, kharif harvest arrivals, likely good rabi output, and adequate cereal buffer stocks," Das said in his statement.

High inflation reduces the disposable income in the hands of consumers and dents private consumption, which negatively impacts the real GDP growth, Das said, explaining the rationale behind a status quo on the benchmark lending rate.

"The MPC believes that only with durable price stability can strong foundations be secured for high growth. The MPC remains committed to restoring the inflation growth balance in the overall interest of the economy," Das said.