New Delhi: The Reserve Bank of India remains focused on boosting economic growth but decided to take a pause on rate cuts following a spike in inflation, governor Shaktikanta Das said on Wednesday in an interview to Indian Express.
“On the whole, inflation has remained under control during the last three-and-half years but for the recent spike on account of spike in vegetable prices, of which onion was the major factor… Going forward, we do expect it to moderate. With this temporary spike in inflation, we have not shifted our attention from growth. We are still focussed on growth. Because of the spike in inflation, we have decided to take a pause," Das said.
The central bank has also started reviewing the monetary policy framework, and expects to hold a roundtable with various experts, economists, analysts and other thinkers “sometime in June 2020."
“…The legal provision in the RBI Act says that price stability should be the prime objective keeping in mind the objective of growth. So, the prime target is price stability 4% +/- 2%. But keeping that as the prime target, the aspect of growth has to be taken into consideration. Internally, we have already started a review of the working of the monetary policy framework in the last three-and-half years. And going. Once our review is over, then we will place the outcome of our review before stakeholders. Based on that, we will take it forward. If there is a requirement, we will also take it up with the government," the governor said.
Das said deceleration, during the current financial year came as a surprise to almost everybody but the RBI was “not so surprised as most others."
“Right from the February 2019 monetary policy, when we started cutting rates, the market was surprised. We started cutting rates from February 2019 because the slowdown in the growth momentum was very clearly visible from the incoming data. And we do nowcasting internally. So RBI decided to act proactively and cut rates five times after February. By the third cut, all analysts agreed that RBI had acted proactively. Many central banks also initially expressed surprise at our decision to cut rates as early as February 2019," he said
On Monday, amid growing concerns over the economic fallout of the novel coronavirus outbreak, Moody’s Investors Service slashed its 2020 growth projection for India from 6.6% earlier to 5.4%. The agency expects a shallower recovery in Asia’s third-largest economy, considering that global growth will likely take a hit following the virus outbreak in China.
The Indian economy is expected to grow at its slowest pace in 11 years at 5% in 2019-20. The Economic Survey has pegged gross domestic product (GDP) growth at 6-6.5% for 2020-21.
