Governor Shaktikanta Das defended the policy steps on Friday (17-06-2022), denying that the RBI was behind the curve, saying that focusing on inflation management sooner would have had “disastrous” repercussions for the economy.
“Tolerance for rising inflation was a must, and we stand by our judgment,” Das said at a Financial Express event.
He said that the central bank was in tune with the needs of the economy and that the RBI’s statutes clearly state that inflation must be managed while keeping the growth scenario in mind.
In the face of the epidemic, the RBI changed its priority to growth and provided cheap money. Despite this, the economy shrank by 6.6 percent in FY21, according to Das, who also inquired about the impact on growth in FY22 if the central bank had changed its attitude sooner.
He made it clear that it could not have shifted its focus to combat inflation 3-4 months earlier. The RBI chose to refocus its attention to inflation control in March after determining that economic activity had risen above pre-pandemic levels, Das said, adding that it could not give a significant rate hike right now.
“…the RBI has taken proactive measures, and I disagree with any notion or description that the RBI is falling behind the curve. Consider what might have happened to growth if we had started raising rates sooner.”
Das made it clear that the 4.5 percent inflation forecast for FY23 in February 2022 was not optimistic, saying that the calculations were based on the assumption that crude would be at USD 80 per barrel, but that the developments following Russia’s invasion of Ukraine days after the central bank made this public have changed the scenario.
On liquidity, he stated that all of the RBI’s actions during the pandemic had a time limit, but that variables outside the central bank’s control, including as several waves of illnesses and the war, have made the departure from easy liquidity policies take longer.
The governor promised a gradual transition out of the easy liquidity circumstances, as well as a “soft landing.”
Related Tags
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Capital Services Support WhatsApp Number
+91 9892691696
IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.