RBI Governor Shaktikanta Das further pointed out that keeping RBI interest rate at 4 per cent also made the recovery easier
Reserve Bank of India (RBI) Governor Shaktikanta Das has recently reiterated that the country's inflation would remain moderate despite period humps. He also pointed out how Indian economy and financial sector have been well-placed and can tackle any global spillover.
While addressing a programme as part of the launch of the Kochi International Foundation, Das compared inflation to an elephant in the room and said, "Now the elephant has gone out of the room for a walk, then it will go back to the forest.”
“When the Ukraine war started, inflation went up, then we immediately avoided negative interest rates,” he added.
The RBI Guv also highlighted that what India did not do also played a vital role in tackling inflation. He said that the RBI did not print any notes as it would have escalated the problems and gone beyond handling.
"In many countries the inflation was deep-rooted but ours is moderating," Das added.
Das further pointed out that keeping RBI interest rate at 4 per cent also made the recovery easier. According to Das, the country’s external sector is also strong and its current account deficit has remained within manageable limits and stood at 1.1 per cent. He cited that India also has one of the largest foreign exchange reserves in the world at about $675 billion.
Das also highlighted the requirements of structural reforms in service sector and others and said that the RBI will bring transformational change in credit delivery especially to small entrepreneurs and farmers.
India's inflation based on the consumer price index (CPI) reached a 14-month high of 6.2 per cent in last month from 5.5 per cent in the month of September due to food inflation.
As per the RBI mandate, the inflation needs to be within the tolerance range of 2-6 per cent, with a medium-term target of 4 per cent.
In October, Governor Das had announced to keep the policy rates unchanged at the fourth bi-monthly monetary policy meeting for FY25.
The central bank increased the repo rate to 6.5 per cent in February 2023, and it has maintained that rate ever since.
The rising retail inflation has raised questions on the Reserve Bank of India (RBI)’s decision to decrease interest rates in FY24, with economists predicting no rate cut this fiscal year. Earlier this month, Das said that a rate cut would only be contemplated once the measure got close to the 4 per cent target level. Commerce Minister Piyush Goyal called this theory flawed to consider food inflation for making a choice cutting rates and suggested the RBI to cut interest rates.