Monetary policy won’t sacrifice growth too much in fight against inflation, says RBI

Reserve Bank of India Governor Shaktikanta Das (File image: PTI)

India’s central bank Governor Shaktikanta Das said monetary policy is mindful of the economy’s growth needs, signaling that tightening will be geared to ensure there isn’t a massive slowdown.

His comments in a fireside chat at the Singapore Indian Chamber of Commerce and Industry’s event in the city-state on Tuesday came as intensifying global price pressures and a weaker currency add to inflationary concerns and pressure on the Reserve Bank of India to tighten policy further.

Data Tuesday showed prices continued to gain at rates above the central bank’s 6% tolerance ceiling.

“We always factor in growth requirement for the economy and the growth sacrifice should be within the manageable limit,” Das said. Policy should not lead to a situation where the economy faces a “massive slowdown.”

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The Reserve Bank of India has raised interest rates by a total 90 basis points in two moves since May to 4.90% to combat price pressures, even as aggressive tightening by some global central banks are fanning the risk of recession. The RBI is scheduled to hold its next monetary policy review from Aug. 2 to 4 with policy makers divided on the pace of hikes.

“We are very mindful of what is the growth sacrifice,” he said.

India’s government has projected the economy to expand as much as 8.5% in the year to March 2023, while the central bank sees growth at 7.2% during the same period.

Das said India’s inflation is seen cooling to below 6% in the fourth quarter of the fiscal year ending March 2023, as commodity prices ease. He sees price gains returning toward the 4% midpoint of its 2%-6% target range in the fiscal year ending March 2024.

Here are some more comments from Das at the event:

- Still, “situation is very dynamic,” Das says on inflation, adding he won’t be able to say what the terminal rate for monetary policy would be

- Das says he’s convinced RBI’s decision to continue with an accommodative stance earlier this year was the right one before the war added to risks, and that helped ensure financial stability.