India cbank chief says fuel excise duty cut is inflation positive

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FILE PHOTO: RBI Governor Shaktikanta Das greets the media in Mumbai
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MUMBAI (Reuters) - The Indian government's move to reduce taxes on petrol and diesel earlier this month will be significantly positive for inflation, Reserve Bank of India governor Shaktikanta Das said on Wednesday adding that growth impulses have become stronger.

The central bank had earlier flagged the risk of higher taxes on fuel to the government and had urged New Delhi to take a policy decision.

With food inflation under control, Das expects that inflation will be under central bank's target.

The RBI had lowered its full year 2021/22 retail inflation projection to 5.3% from 5.7% in October, saying the inflation trajectory has turned out to be more favourable than expected.

Even the growth target of 9.5% laid out for this financial year is quite achievable although global headwinds remain, Das added in a conversation with Business Standard Newspaper.

The RBI had cut its key rates by 115 basis points to revive growth since March last year and injected liquidity since April last year along with other global central banks.

India’s record forex reserves also give a lot of confidence and security to the foreign exchange market, he said.

As the U.S. Federal Reserve gears up to taper its huge asset purchases, the impact on Indian market is likely to be limited and there is unlikely to be a repeat of 2013 when it caused huge volatility across markets.

"Today we are in a much more comfortable position. We will not see the kind of challenges that India observed during 2013,” said Das, adding that India had strong foreign exchange reserves that now provide comfort to the markets.

The central bank also expects loan growth, which has been languishing in low-single digits, to strengthen next year as there are signs of investment pick-up.

(Reporting by Nupur Anand; Editing by Steve Orlofsky)

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