Vegetable prices in India to decline from September, says cenbank chief

G20 Finance Ministers' and Central Bank governors' meeting at Gandhinagar

By Siddhi Nayak

MUMBAI (Reuters) -Vegetable prices in India have begun to soften and are likely to decline from September, Reserve Bank of India (RBI) Governor Shaktikanta Das said in a speech on Wednesday.

Spiralling prices of vegetables and cereals have led retail inflation in July to surge 7.44%, its highest in 15 months.

"We expect to see an appreciable slowdown in vegetable inflation from September," Das said.

The outlook for cereal prices looks bright even though geopolitical tensions could hamper food prices, he said.

Das said despite elevated core inflation, the steady easing seen in it over the last few months is a sign of monetary policy transmission.

The central bank would be on guard to ensure that inflation does not remain persistent and get generalised across segments, he said.

"The frequent incidences of recurring food price shocks pose a risk to anchoring of inflation expectations, which has been underway since September 2022. We will remain watchful of this," Das said.

India has raised rates by a total of 250 basis points since May 2022 to tame rising prices. The central bank remains firmly focused on aligning inflation to the Monetary Policy Committee's mandated medium-term target of 4%, Das said.

He said price stability has to be the basis of sustainable growth, adding that the conditions are favourable for the growth to continue and the capex cycle to gain momentum in 2023-24.

On the rupee, the central bank chief reiterated that the RBI has no specific target but would continue to build its foreign exchange reserves to help manage any dollar outflows.

"The Reserve Bank has also made conscious efforts to improve systemic resilience and efficiency by maintaining external stability and building forex reserves," he said.

(Writing by Swati Bhat; Editing by Pooja Desai and Arun Koyyur)