Monetary Policy Will 'Unambiguously' Focus On Getting Inflation Down: RBI Governor

Reserve Bank Governor Shaktikanta Das on Tuesday maintained that the high interest rates are not hindering growth, and clarified that the monetary policy will "unambiguously" focus on getting inflation rates down going forward. The statement was made while addressing an event by the Bombay Chamber of Commerce and Industry.

Das said that the country is at the starting point of a "major structural shift" in its growth trajectory and is moving towards a path where 8% real GDP growth can be sustained on a yearly basis.

"Normally, if growth is well-sustained, if you've good growth, then it is a clear sign that your monetary policy and your interest rates are not acting as an impediment to growth," Das said.

Addressing the debate on the sacrifices to growth because of the elevated interest rates, Das said such concerns are misplaced and the growth momentum is continuing month-on-month.

He said RBI's nowcasting team is projecting a GDP growth number at 7.4% for the June quarter, which is higher than the central bank's own estimate of 7.3%, and added that he is confident of the economy growing at the RBI estimated 7.2% for FY25.

"A good growth outlook gives us the necessary space to unambiguously focus on inflation," he said.

Das used the analogy of chess to underline the focus on the inflation moderation going ahead and made it clear that one wrong move can distract and get us off-track now.

A single adverse weather event can take inflation back to over 5%, he said, stressing on the focus that is required.

The inflation has come down by 3.1 percentage points to 4.7% currently from a high of 7.8% in 2022 "primarily" due to monetary policy actions, he said.

Connecting lower inflation with growth aspirations, he said a lower level of price rise can ensure sustainable growth.

"High inflation makes the economy uncompetitive, makes the economy an unfavourable destination for both domestic as well as foreign investments, above all, a high inflation would mean lowering the purchasing power of the people, especially the poor people," he said.

Das said after three years of growth getting a push from the government expenditure, there is "clear evidence" of private capital expenditure picking up. He highlighted sectors associated with infrastructure like cement and steel witnessing the highest interest.

Contrary to some calls, including by former RBI Governor Raghuram Rajan, who asked India to focus on the services sector for growth, Das said the economy will grow only when multiple sectors fire up and pitched for a "multi-sectoral" approach to keep pushing for growth.

He said a large economy like India cannot exclusively rely on either manufacturing or services to achieve its growth ambitions.

In comments that come a day after the RBI placed an additional director on the board of Bandhan Bank Ltd., which is undergoing leadership transition, Das said the banking and non-bank sectors are healthy.

The financial stability metrics of India are better than earlier, he said.

Das said GST, bankruptcy code and also flexible inflation targeting have been some of the best structural reforms in the recent past which have helped the country.

(Text Inputs From PTI)