RBI: Will keep an eye on vegetable prices given IMD's forecast of high temperatures, said Governor Das

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said the central bank will keep an eye on vegetable prices which may be affected by the rising heat. The India Meteorological Department (IMD) has predicted heat waves in many parts of the country during the summer season (April to June) this year.

Speaking to reporters after the announcement of the first bi-monthly monetary policy for the financial year 2024-25, Das said, “So we have to see what impact it has on food crops.” I have mentioned the major vegetables. Our information about the wheat crop is that harvesting has almost been completed. It is completely over in the central part of India and the wheat crop is almost ready in other places also.

He said that the availability of wheat will not be affected as much as it was two years ago when there was a severe heat wave in March. Das said, “So there is not much worry in the case of wheat, but the prices of vegetables will have to be kept an eye on.” There can be many other effects of heat waves.

He said that the final step of reducing inflation is always challenging. On this issue, RBI Deputy Governor M.D. Patra said that food inflation has been highly volatile and is likely to remain high due to adverse climatic conditions.

However, the Reserve Bank has retained the retail inflation estimate for the current financial year 2024-25 at 4.5%. The RBI Governor said, “Assuming that the monsoon will be normal, consumer price index (CPI) based inflation for 2024-25 is estimated at 4.5%.”

According to RBI, inflation is likely to be 4.9% in the first quarter, 3.8% in the second quarter, 4.6% in the third quarter and 4.5% in the fourth quarter. On postponing the implementation of its instructions on rupee-linked exchange-traded currency derivatives (ETCDs) by a month i.e. till May 3, he said, "This decision has been taken based on the feedback received from the stakeholders."

“Regarding the need for extension, I would say that we got feedback and requests from many market participants that they needed more time,” Das said. The previous 'Master Direction' was issued in January 2024, in which it was said that it would be effective from April 5. He said that everything is very clear, "... received from people associated with the market. Due to requests, we have expanded it. We have now changed the time of the circular issued in January to May 3 instead of April 5.

Deputy Governor Patra said the January 2024 circular was a 'master direction' and reiterated what had been in place since 2014. Das said that RBI will release the framework for financial technology (fintech) self-regulatory organization by the end of this month. During the interaction, another Deputy Governor T. Rabi Shankar said that so far 2.2 crore CBDC (central bank digital currency) transactions have been done by 46 lakh users and four lakh merchants.