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‘Monetary policy must remain disinflationary,’ says RBI Governor Shaktikanta Das
- RBI Governor stressed that monetary policy must remain disinflationary so that the decline in inflation continues
Reserve Bank of India Governor Shaktikanta Das on Friday highlighted the challenges of inflation, slowing growth, and financial stability during the inaugural session of the Kautilya Economic Conclave 2023.
Das emphasised actively disinflationary monetary policy. The RBI Governor stressed that monetary policy must remain disinflationary so that the decline in inflation from its peak of 7.44% in July continues smoothly.
He said monetary policy is challenging and there is no room for complacency.
The RBI Governor spoke about the global challenges and impact on inflation.
On Israel and Hamas war, Governor Das said India is well placed. He said, “Of course, we are impacted by what is happening all over, no doubt on that... Our microeconomic fundamentals continue to be sound, and our financial sector continues to be sound. Eventually, in these uncertain times, what matters is how strong are your microeconomic fundamentals, how strong is your financial sector? I think on both the parameters, India is well placed.”
Governor Das added, “The global economy is now facing a tirade of challenges. First, slow moderation in inflation, which is getting interrupted by recurring and overlapping shocks. Second, slowing growth, and that too is fresh and enhanced obstacles. And third, lurking risks of financial stability. Central banks with price stability as their primary objective have raised policy rates aggressively while signalling to keep the rates higher for longer. Some of the central banks have taken a pause on rate hikes. Financial stability concerns have conditioned this pursuit... Financial markets have become highly sensitive to every piece of new information. Policymaking has become extraordinarily complex in the middle of such a confluence of factors. Conflict may arise between the requirements of price and financial stability, but policymakers have to trade a fine balance as it is important to recognize that price and financial stability reinforce each other in the medium to the long term".
With regard to the domestic financial sector, the RBI Governor said Indian banks would be able to maintain minimum capital requirements even during stress situations.
India is poised to become the new engine of global growth, Das said, and added the country is expected to clock a 6.5% GDP growth rate in the current fiscal ending March 2024.
Retail inflation declined to a three-month low of 5.02% annually in September. The Consumer Price Index (CPI) was 6.83% in August and 7.41% in September 2022. In July, inflation touched a peak of 7.44%.
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Business NewsEconomy‘Monetary policy must remain disinflationary,’ says RBI Governor Shaktikanta Das
First Published:20 Oct 2023, 12:35 PM IST
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