Addressing the annual session 2023 of industry body CII here, Das said the MPC in its last meeting in April had decided to take a pause to “allow the impact” of the 250-basis point repo rate hikes already effected since May 2022 to play out. “We had said it’s a pause, and not a pivot,” he added.
“(Increase in rate) The monetary policy acts with a time lag and you have to allow that time for the monetary policy to play out and transmit,” he said. “The situation is extremely fluid, it’s extremely dynamic. I would also like to say the war against inflation isn’t over. We have to remain alert. There is no cause for complacency, especially we have to see how the anticipated El Nino factor plays out,” he added.
The governor said economic growth momentum in the March quarter remained strong and the FY23 growth could exceed the official projection of 7%. The provisional GDP data for FY23 would be released later this month.
About 17 high-frequency indicators that the RBI monitors show that economic activities sustained momentum. “Therefore, I won’t be surprised if the growth is slightly more than 7% (in FY23),” he said.
He also stuck to the central bank’s FY24 growth projection of 6.5% for the country, while acknowledging that some international agencies have pegged it at lower levels. The International Monetary Fund, for instance, has projected India’s FY24 growth to drop to 5.9%.
“But we derive confidence that agriculture at this point has done well and we are assuming a normal monsoon. The services sector continues to perform very well,” he said. The government has also made provision for high capex in the latest Budget and the capacity utilisation in manufacturing, according to the latest CII survey, exceeds even 75% revealed in the last survey of the RBI. All these, the governor suggested, could help push economic growth to close to 6.5% in FY24.