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MUMBAI : The Reserve Bank of India (RBI) is keeping a close watch on core and fuel inflation, which have remained elevated even as food prices moderate, governor Shaktikanta Das said on Wednesday.

Nevertheless, Das expects inflation to be in line with the monetary policy committee’s (MPC) projection of 5.3% in FY22. Inflation measured by the consumer price index (CPI) eased to 4.35% in September from 5.3% in August.

“So far as India is concerned, core inflation has remained elevated, and that is a policy challenge, and we are keeping a very close watch of the evolution of the core inflation. Fuel inflation has also remained elevated. Therefore, we are very watchful with regard to core and fuel inflation; food inflation seems to have stabilized," Das said at an event organized by Business Standard.

He added that the recent excise duty cut on petrol and diesel is “positive" for inflation. The central bank had earlier reiterated the need to lower fuel prices to contain inflation. In the October policy, Das said that efforts to contain cost-push pressures through a calibrated reversal of indirect taxes on fuel could contribute to a more sustained lowering of inflation and anchoring of inflation expectations. 

“Positive developments (are) emanating from the petrol and diesel price reductions, which incidentally was not factored into the 5.3% projection (for FY22 inflation)," he said on Wednesday.

Last week, the government announced a 5 and 10 cut in petrol and diesel excise duties, leading to some states also announcing cuts in value-added tax (VAT) on fuel. Das said that in India, inflation originated from the rise in prices of food items like edible oil and pulses, while other commodities such as petrol and diesel also had their impact.

“Most of it was caused due to supply-side factors. So, supply-side factors have been addressed by the government, particularly with reference to pulses and edible oils, and now very recently with reference to petrol and diesel," he said, adding that food inflation, by and large, looks to be now under control.

To be sure, he cautioned that food inflation, though under control, has uncertainty built-in around unseasonal rains and unexpected weather events. Speaking on the global situation, Das highlighted risk factors like the sudden surge in energy prices, commodity prices and crude oil prices.

“At least some people say they seem to have peaked, but these are markets where it is very difficult to project whether they have really peaked. Globally, inflation has to be very carefully watched. In a fast-changing scenario, one has to remain very careful and watchful of the global as well as the domestic situation," he said.

Das also said that the numbers being thrown around on India’s crypto market participants seem to be “somewhat exaggerated" and reiterated that cryptocurrencies are a serious concern for the central bank. 

“I don’t claim that I have 100% information. Since it is an unregulated territory, we don’t get full information. But whatever information and feedback we have, with a reasonable amount of confidence, I think that the number of participants in the crypto market seems somewhat exaggerated," he said. 

Das also pointed out that the majority of India’s crypto investors, 70% or more, have invested 1,000-3,000, and perhaps there is an effort to enrol as many investors as possible.

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