Reliance Jio, Airtel tariff hikes likely to elevate core inflation

NEW DELHI: The Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday said that recent tariff hikes by telecom operators can have some impact on core inflation going ahead while suggesting that the monetary policy committee seeks a greater clarity over the counter-cyclical measures that the government may announce in the forthcoming Budget.

There is no worry over fiscal deficit, he said. “We have always maintained that fiscal and money policies need to work in coordination to lift the economy,” he said.

So far, there is a good coordination between fiscal and monetary authorities, Das said.

Das said that while some green shoots on the growth front are visible, it is too premature to assume how sustainable they are. He said that the recent corporate tax cut will result in capex revival, even as it may take some time.

Das noted that timing of the rate cut was important rather than mechanical cuts. “Rate cut must be done when impact is maximum” he said.

The governor told reporters that MPC’s internal calculations suggest a spike in food inflation in the March quarter.

“Our calculation suggests food inflation will remain very high during the fourth quarter, and its moderation in coming months will depend on several factors,” he added.

Telecom operators Bharti Airtel and Vodafone idea recently announced tariff hikes for pre-paid plans by up to 50 per cent. Jio, on the other hand, has announced up to 40 per cent higher tariff, but claims it would provide up to 300 per cent more benefits than competitors.

The hikes have been the first in the industry since 2016, and steeper than Street estimates. The tariff hikes would give a Rs 25-30 boost to the telecom players’ average revenue per user (ARPU).

Shaktikanta Das said that there is a need to optimise the impact of rate cuts. Monetary transmission by lenders has been full and reasonably swift, he noted.

RBI revised GDP growth projection downward to 5 per cent from 6.1 per cent for the ongoing financial year while increasing retail inflation projection upwards to 5.1-4.7 per cent for the second half of the year.

Das said that since MPC’s last meeting in October, global economic growth remained subdued, even as some signs of resilience are becoming visible.

The six-member MPC maintained status quo on policy rates in its fifth bi-monthly monetary policy review of the financial year. The short-term lending rate, or repo rate, was unchanged at 5.15 per cent. All six committee members voted against the rate cut.

The RBI said its monetary stance will remain accommodative as long as it necessary.