Premature To Change Monetary Policy Stance: RBI Governor Shaktikanta Das

Shaktikanta Das reaffirmed the RBI's confidence in the economy achieving a growth rate of 7.2 per cent in FY25, noting that this figure is a conservative estimate

Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday said that it is "too premature" to alter the current monetary policy stance, highlighting the need for a cautious approach regarding interest rates. Speaking at ET Now's Leadership Dialogues, Das stressed the importance of avoiding "adventurism" on the rates front. Das said that the RBI, in collaboration with the Securities and Exchange Board of India (SEBI), is closely monitoring the high trading volumes in the futures and options segment. However, he noted that any regulatory action would be undertaken by SEBI.

In his remarks, Das projected that the current account deficit (CAD) for the March quarter might fall below 1.2 per cent of GDP, the figure recorded for the first nine months of fiscal year 2023-24. The CAD had moderated to 1.2 per cent during this period, down from 2.6 per cent in the same period the previous year, primarily due to a reduced merchandise trade deficit.

Addressing the inflows following India's inclusion in global bond indices, Das assured that the RBI would continue to build reserves to manage future market volatilities. As part of this strategy, the RBI will keep adding to its gold reserves.

Das reaffirmed the RBI's confidence in the economy achieving a growth rate of 7.2 per cent in FY25, noting that this figure is a conservative estimate. Internal analyses suggest higher-than-expected growth in the June quarter.

On the inflation front, Das acknowledged that while core inflation has decreased, food inflation remains high, with uncertainties persisting. He reiterated that changing the policy stance prematurely would be imprudent, and stressed the need for vigilance.

The six-member Monetary Policy Committee (MPC) has maintained its "withdrawal of accommodation" stance, keeping the repo rate unchanged in eight consecutive bi-monthly reviews. However, dissent within the committee has grown, with two members now opposing the status quo.

Das reiterated his earlier comments, stating that the most challenging part of inflation control is the "last mile," as inflation is moderating but at a slow pace. He underscored that accelerating the reduction of inflation might require sacrifices in economic growth.

In summary, Das said the RBI's cautious approach, focusing on maintaining stability and avoiding hasty policy changes in the face of economic uncertainties.