MUMBAI, April 24 (Reuters) - India's central bank is taking a wait-and-watch approach to the Middle East war, but has not ruled out second-round effects on inflation if the conflict drags on, Deputy Governor Poonam Gupta told the Economic Times in an interview published on Friday.
Here are some of her key comments:
o The Reserve Bank of India's base-case assumption is that the conflict will be resolved in a few months, with supply chains being restored subsequently and demand-supply normalising thereafter.
o For now, there is no evidence of second-round effects unanchoring inflation expectations.
o Prevailing tolerance band around the inflation target helps accommodate supply shocks and tolerate inflation deviations in the short term, helping avoid policy-induced volatility through frequent interest rate changes.
o Better co-ordination between monetary and fiscal policies has helped optimise the effectiveness of the inflation-targeting framework.
o El-Nino is unlikely to have a significant impact on agriculture as the sector has become more resilient to shocks.
o In the ongoing fiscal year, negative shocks have been front-loaded. It is quite possible that positive surprises will follow.
(Reporting by Dharamraj Dhutia; Editing by Sonia Cheema)
