Clear Commitment Crucial To Achieve 4 Per Cent Inflation Target: RBI Governor Das

RBI Governor Shaktikanta Das acknowledged that while inflation has been easing, the pace of moderation remains slow

Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday underscored the central bank's unwavering commitment to achieving a 4 per cent inflation target, warning that any misstep could "severely compromise" economic growth. Speaking at an event organised by the Bombay Chamber of Commerce and Industry, Governor Das acknowledged that while inflation has been easing, the pace of moderation remains slow. In May, consumer price-based inflation (CPI) softened slightly to 4.7 per cent from 4.8 per cent in April.

"One severe weather event and vegetable prices may go up, and we will be at 5 per cent CPI inflation," Das cautioned. "We have to navigate our path towards the 4 per cent inflation target with a clear and unambiguous focus and commitment. There cannot be any wavering or distractions at this stage because any distraction will severely compromise growth."

This statement follows the RBI's Monetary Policy Committee (MPC) decision on June 7 to keep the repo rate unchanged at 6.5 per cent for the eighth consecutive time. The governor's remarks also come in the wake of dissent from two external MPC members, Jayanth Varma and Ashima Goyal, who advocated for a 25 basis points (bps) cut in the repo rate.

Drawing an analogy to chess, Das said the critical nature of avoiding policy errors. "In chess, a single wrong move can finish the game. Similarly, in managing inflation, a wrong move can derail our progress, making recovery more costly and time-consuming. We must base our monetary policy actions on inflation numbers and our economic outlook," he said.

The RBI projects CPI at 4.5 per cent for FY25, with inflation expected to be 4.9 per cent in Q1, 3.8 per cent in Q2, 4.6 per cent in Q3, and 4.5 per cent in Q4.

On the growth front, Das expressed optimism, stating that the country's economic growth is well-sustained with a positive outlook for the current year. "We are confident that India will record 7.2 per cent growth in the current year (FY25)," Das said. He noted that Q4 FY24 saw a GDP growth rate of 7.8 per cent, with an estimated 7.3 per cent growth in the first quarter of this financial year.

Das highlighted that the growth momentum is robust, with rural consumption picking up and external demand gaining traction. "Government capital expenditure has driven growth over the last three years post-Covid, and now private sector investment is rising in specific sectors like cement and steel," he added.

However, Das warned of risks to growth, including weather-related events, geopolitical conflicts, global trade and capital flow fragmentation, and potential financial sector volatility.