While delivering a speech in Delhi at the first edition of the Kautilya Economic Conclave, the RBI governor said that it will continue to calibrate its policies with its overachieving goal of maintaining and promoting macroeconomic plans. “In this endeavour, we will remain flexible in our approach while being cogent and transparent in our communication,” he said.
“Our endeavour has been to ensure a soft landing (a moderation in inflation closer to targets with only a moderate slowdown in output growth),” Das said, demonstrating that cooling price pressure may decrease the need for aggressive monetary action.
While expressing confidence that price status will gradually improve in the second half of the fiscal the governor said that the central bank will resume taking monetary measures to ticker inflation with the view to achieving strong and sustainable growth.
“Overall, at this point of time, with the supply outlook appearing favourable and several high-frequency indicators pointing to resilience of the recovery in the first quarter (April-June) of 2022-23, our current assessment is that inflation may ease gradually in the second half of 2022-23, precluding the chances of a hard landing in India,” the Governor said.
Moreover, Das said that inflation is a benchmark of the confidence and trust that the general public responds to the economic standings of the country.
“While factors beyond our control may affect inflation in the short run, its trajectory over the medium-term is determined by monetary policy. Therefore, monetary policy must take timely actions to anchor inflation and inflation expectations so as to place the economy on a strong and sustainable growth pedestal.
“We will continue to calibrate our policies with the overarching goal of preserving and fostering macroeconomic stability,” he said.
The Monetary Policy Committee (MPC) in its April and June meetings revised the prophecy of inflation for 2022-23 in two different stages to 6.7 per cent, taking stock of the evolving outcomes and with inflation pressures getting generalised, Das noted.
Almost Three-fourths of the revision in June was on the statement of geopolitical spillovers to food prices, he said, adding the MPC also chose to increase the policy repo rate by 40 bps and 50 bps in May and June, respectively.
This was on top of the 40 basis points (bps) effective rate hike via the opening of the Standing Deposit Facility (SDF) at 3.75 per cent.
During this period (April to June 2022), the MPC also changed its stance on the withdrawal of accommodation.
Speaking of global growth, Das said that the constricting financial situations due to the ongoing monetary policy normalisation on the one hand and the persisting geopolitical tensions on the other pose significant downside risks in the near term.
“They are also sparking stagflation concerns worldwide, with even talk of recession in some parts of the world,” he said.
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