Recently, central bank’s rate-setting panel decided to keep the repurchase rate (repo rate) unchanged at 6.5 per cent.
“Interest rate cut at this stage will be premature and very very risky,” said RBI Governor Shaktikanta Das during the fireside chat. “We are not behind the curve. India growth story remains intact. Growth is resilient. Inflation is moderating. A rate cut at this stage will be risky. We have to wait for the incoming data and overall inflation outlook,” added Das on possible rate cuts in December MPC meeting.
While inflation is expected to moderate, there are “significant risks” to the outlook, Das told Bloomberg News Deputy Editor-in-Chief Reto Gregori at the India Credit Forum in Mumbai on Friday.
Inflation to remain high in Oct:
India’s retail inflation accelerated to a 9-month high of 5.49 per cent on an annual basis in September, driven by a persistent rise in vegetable prices and a lower year-ago base. Retail inflation had eased to a 5-year low of 3.65 per cent in the previous month. The spike in retail prices in September also marks the first time since July that the print has exceeded the Reserve Bank of India’s (RBI) 4 per cent medium-term target.
Commenting on recent inflation numbers, Das said the inflation is expected to remain high even in October with ease expected from November onwards.
‘RBI not police but…’
Das on Friday said that the central bank does not act like a policeman, but it maintains tight vigil on financial market and takes regulatory action whenever necessary. The RBI governor’s remark came a day after the central bank directed Sachin Bansal’s Navi Finserv and three other NBFCs to cease and desist from sanctioning and disbursing loans effective from the close of business of October 21 on material supervisory concerns, including usurious pricing.”No…we are not policemen. We are watching. We are watching very closely. We maintain vigil over the credit markets and…when it becomes necessary, we take action,” he said at the India Credit Forum hosted by Bloomberg.
Observing that this is India’s moment, Das said: “India’s growth story is intact. Inflation has now come very much within the target range. It is expected to moderate.”
In fact, there are significant risks, he said, RBI is very careful in monitoring the overall outlook with regard to both growth and inflation.