RBI Says Low Inflation Boosts India’s Competitiveness
The Reserve Bank of India (RBI) has said that low inflation in India is helping to support the country’s global competitiveness and sustain economic momentum. In its latest assessment of economic indicators, the central bank noted that even though headline consumer price inflation edged up slightly in November, it stayed below the lower tolerance limit set in its inflation target framework. This benign inflation environment has helped keep input costs in check for businesses and improved pricing conditions for exporters.
The RBI also highlighted that high-frequency indicators in November show that overall economic activity remains stable and demand within the economy continues to be strong. The combination of subdued price pressures and resilient demand suggests a favourable backdrop for growth, the bank said.
Impact on Growth and Exports
The central bank’s view reflects a broader consensus that controlled inflation can enhance export competitiveness by restraining cost pressures on domestic producers. Lower inflation has contributed to keeping interest rates supportive of growth and has provided policymakers with flexibility in managing monetary conditions.
Analysts say that while low inflation supports competitiveness, it also poses challenges. Inflation persistently below target may reduce pricing power for producers and could prompt policymakers to monitor demand conditions closely to avoid deflationary trends.
Outlook and Policy Space
The RBI noted that benign inflation gives it policy space to respond to evolving economic conditions, including supporting growth if needed. However, the central bank remains watchful of external risks such as currency fluctuations and global demand shifts. Continued efforts to balance inflation stability with growth support will likely shape monetary policy decisions in the coming months.
