Governor Shaktikanta Das on August 27 said the Reserve Bank of India (RBI) won't surprise the market with a sudden rate hike and all monetary policy actions would be carefully calibrated. The current inflation trajectory looked transitory, the country's top banker said in an interview to CNBC-TV18.
In its August policy review, the RBI kept the key rates unchanged and said the policy stance would remain accommodative as long as was necessary.
Here are key points from Das's interview:
Estimate GDP growth for the current fiscal year at 9.5 percent and the Q1FY22 growth has been at 21 percent.
The economic activity gained momentum in the first quarter and a revival of activity is being seen in various sectors.
The RBI and monetary policy committee’s efforts have been to reduce rates and create congenial conditions.
The RBI has taken around 100 measures since March 2020 to mitigate the impact of Covid.
Also read: Retail inflation cools to 5.59% in July, comes back to within MPC's target range
There is a gap in capacity utilisation in India. There is slack in the economy but don’t see any sign of stagflation.
The RBI had used targeted TLTRO scheme for SMEs and many SME players have taken up restructured package. The RBI doesn’t control supply side of the factor in inflation.
Also read: Why RBI will not be in a hurry to normalise policy rates
Capacity utilisation, at the moment, is nowhere near the pre-pandemic levels.
These are the aspects that are regularly analysed internally in the RBI and all options are open to taking appropriate actions.
On the bond index, the RBI and the government are working closely with bond-index providers. There are some issues relating to capital account convertibility. The bond index entities have a certain way of looking at capital account convertibility.
India is not fully convertible in the capital account. Having said that, India is almost there, as there are no restrictions on outflows. The G-SEC market is most liquid in India. The regime for FDI, FPI has been liberalised to quite an extent.
India has no artificial restrictions that prevent the free flow of capital both ways. "It’s a process of convincing them and going forward we should see some traction," Das said.
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