Governor of RBI Shaktikanta Das said that the Central Bank of India had not yet ‘fell behind the curve’ in connection with raising interest rates. RBI, he said, is in line with the reality of growth and inflation. The RBI Governor’s comments came when inflation was in the highest months in India with crude oil prices and food increased sharply over the past few months in the midst of a number of reasons, including the Russian Ukraine War.
“I will not agree with any perception or any description that RBI has fallen behind the curve. We have been in line with our time requirements. Just imagine if we start to increase the number earlier, what will happen to growth? These are all review knowledge, “said Das Shaktikanta at an event related to BFSI in Mumbai on June 17, Friday.
“Could it be (the initial increase) has prevented the surge of inflation caused by war? No. Inflation is still at 7 percent. “Das said at the event.
Higher tolerance of inflation during Pandemic is a must, if not, economic damage and financial markets will be very large and will take years for India to return, “he added. RBI has maintained the repo level at the lowest historical point of 4 percent during the period Pandemi for two years to overcome the macroeconomic situation. At that time, the central bank also instilled liquidity in the financial sector.
However, the Monetary Policy Committee led by RBI is now slowly withdrawing from its accommodative attitude. MPC raised RBI repo rates by 90 basis points from 4 percent to 4.90 percent during May and June. In May, RBI held an MPC Cycle off meeting to increase repo tariffs by 40 basis points, and then raised it with 50 basis points during the meeting scheduled earlier this month.
This happens after inflation in India has a challenge for the central bank and stands at the highest level of almost eight years. Indian retail inflation reached 7.04 percent in May, reduced from a height of 7.79 percent in April. However, retail inflation has become the medium-term target of RBI RBI of 4 percent for 32 consecutive months. Over the past five months, on the other hand, retail inflation has been above the sky up to 6 percent.
“I think it is the decision of the monetary policy committee to tolerate higher inflation, of course, among other factors that contribute to the economic rise and bring it to a place where we are now,” Das said that day. “India is much better placed than many other economies to face the impact of war.”
The Ukraine Russian War Surprise encouraged RBI to deal with this problem in a calibrated way and priority is to remain closer to the inflation target, Das said that day. RBI also targets “soft landing” to withdraw liquidity, said the Governor.