NEW DELHI: Ashima Goyal, a member of the Monetary Policy Committee (MPC), said on Sunday that the Reserve Bank of India is not "behind the curve" in raising interest rates to combat rising inflation, and that it is never wise to overreact to shocks when the economy is still recovering from the coronavirus pandemic.

While conceding that India is "particularly sensitive" to the mix of food and crude oil inflation brought on by the Russia-Ukraine conflict, Goyal, who is also an accomplished economist, stressed that rate hikes should be timed to coincide with the country's economic recovery.

Her remarks come just days after the MPC, the central bank's rate-setting body, stunned markets by raising the repo rate by 40 basis points in an off-cycle policy meeting earlier this month. It was also the first rate boost since August 2018, when inflation was at an all-time high.

"The RBI began rebalancing liquidity last year, but the US Federal Reserve has yet to begin decreasing its balance sheet, despite inflation considerably beyond its target," she said. Goyal claimed Indian demand and wages are "soft", despite the fact that inflation has just breached the RBI's tolerance limit due to the ongoing Ukraine-Russia war.
"Due to significant government spending, there was an over-stimulus in the United States. The labour market is tight. Although the Fed is behind the times, the RBI is not. Inflation in India varies from that in the United States "she emphasised.

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