RBI letter to government on inflation failure won't be a secret for long: Governor Das

The Reserve Bank of India’s (RBI) report to the government after it failed to meet the inflation mandate may be a “privileged communication” but it will be released to the public at some point, Governor Shaktikanta Das said on November 2.

Addressing the annual banking conference organised jointly by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Indian Banks' Association (IBA), the RBI governor said there was no question about monetary policy being anything other than transparent.

“The entire monetary policy framework is based on strong principles of transparency,” Das said. "The MPC’s (Monetary Policy Committee) resolution is meant for the entire economy. The markets should know what is the RBI’s decision. The citizens of the country should know what is the RBI’s decision."

"Unlike that, in case of the letter which the Reserve Bank writes to the government (after failure), it is a report sent under a law. I don’t have the privilege, the authority, or the luxury to release a letter like this written under the law it to the media before even the addressee gets it,” the governor added.

“But that is not to assume that the contents of this letter and the report are going to be perennially under wraps. They will be available in the public domain at some point... The first right of receiving the letter lies with the government.”

The central bank is deemed to have failed when inflation stays outside the mandated range of 2-6 percent for three quarters in a row. The September inflation print meant inflation had spent 36 consecutive months - or three full years - above the medium-term target of 4 percent.

Inflation averaged 6.3 percent in January-March, 7.3 percent in April-June, and 7 percent in July-September. The central bank lined up an unscheduled meeting of the Monetary Policy Committee on November 3 under Section 45ZN of the RBI Act, which relates to ‘failure to maintain inflation target’.

Das said on November 2 that the central bank is closely monitoring inflation trends and the impact of previous monetary policy actions. He reiterated that the endeavour of the central bank remains to be within the target band, while focusing on sustained economic growth and maintaining financial stability.

As per the RBI's latest inflation forecast, the CPI inflation may average 5.2 percent in FY24 – 150 basis points lower than the average of 6.7 percent projected for this financial year. RBI officials, including Das, have mentioned how two years is an appropriate period of time for inflation to be lowered to 4 percent.