Stressing that the pause opted for in April and June meetings by the Monetary Policy Committee is not a pivot, Das said that the panel is assessing the impact of past actions.
The governor was speaking at the Summer Meetings organised by Central Banking, London, UK.
Barring the recent pause, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation.
Data released by the NSO on Monday showed that the retail inflation in India further eased sharply in May to 4.25 per cent, hitting a two-year low.
RBI’s consistent monetary policy tightening since mid-2022 could be attributed to the substantial decline in inflation numbers in India. India’s retail inflation was above RBI’s 6 per cent target for three consecutive quarters and had managed to fall back to the RBI’s comfort zone only in November 2022.Under the flexible inflation targeting framework, the RBI is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 per cent range for three quarters in a row.”Our approach towards maintaining the stability of the Indian financial system is integral to our conduct of monetary policy as financial instabilities can undermine economic growth and impede monetary policy transmission,” Das said.
“We recognise that the likelihood of financial turbulence would be high if there is no price stability,” he added.
The RBI’s rate-setting panel prioritised economic growth during the pandemic years even as inflation remained above the target but within the tolerance band.
India’s GDP contracted 5.8 per cent in FY21 but grew 9.1 per cent in FY22 and 7.2 per cent in FY23.
“Given our population and large addition to the work force every year because of the demographic dividend we cannot be oblivious to growth concerns,” Das said.
The government’s continued thrust on capital expenditure is creating additional capacity and nurturing the much-awaited revival in the corporate investment cycle, Das said.