The fight against inflation shouldn’t be at the cost of economic growth is what seems to be the RBI‘s approach as it manages the delicate balancing act to bring down prices even when the economy is still not completely out of the woods.
The RBI governor justified the off-cycle announcement on rate hike by stating that the action was merited so as to avoid a bigger shock in the June policy.
Das said that fighting inflation is the topmost priority for the RBI right now as it affect public welfare. He added that the subsequent hikes will depend on the revised inflation forecast that the MPC will come up with in June.
Many have pointed out the delay in RBI’s response could mean more aggressive rate hikes further jeopardising India’s economic recovery. High inflation could also impact private consumption, a key drive of economic growth.
“There are clear signs of demand revival and private consumption. There are also indications of a pickup in private investment. Our growth scenario looks far more comfortable and better than other countries,” Das said.
The RBI had revised the growth projection in April policy downwards to 7.2% from 7.8% earlier.
The governor underlined the uncertainities in the global economy and geopolitical situation and said that India is better off in terms of inflation than some of the advanced economies.
“Each central bank has to take its own call based on the local situation … (in) advanced countries, the (inflation) target is 2% and it (current inflation) is at 6 or 7 or 8%. For them, it is a bigger worry. In India, 7.8% against our upper tolerance band of 6%. India is better off,” the governor stated.