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The Reserve Bank of India's (RBI) Governor Shaktikanta Das has said the Monetary Policy Committee continuing with the accommodative policy stance and this was the prime reason for not hiking the reverse repo rate at recent policy review. Das also said that the weighted average rate for reverse repo moved up to 3.87 per cent on February 4, as against 3.37 per cent in August 2021, hinting that the narrowing of the rate corridor -- the difference between the repo at which it lends and the reverse repo at which it absorbs excess funds from banks -- has already happened courtesy the RBI’s liquidity measures.

Das said that the rates represent a particular stance with regard to the monetary policy and the committee decided to continue with the accommodative stance. He said ‘When the stance continues, we did not see any reason to make any changes or tamper with the rates’. On the issue of other central banks’ actions, Das said monetary authorities across the world are in ‘divergent’ modes as guided by their individual domestic situations, and added that the RBI has also kept the domestic requirements in mind before arriving at the decision.

Additionally, he said the character of inflation – which continues to be high in India and is likely to test the upper tolerance of RBI soon – is different from the ones in other economies. He said the RBI is not ‘falling behind the curve’ given the domestic situation on inflation and growth. About inflation projections, he sounded confident about the 4.5 per cent estimate for FY23, saying the same has been arrived at after a lot of rigour and also considering the worst case scenarios. He noted the projections are ‘realistic’ and also keep in mind that the ‘credibility’ of the central bank is at stake.

On growth, he said the process is positive and the momentum is indeed picking up, but the GDP growth figure has an impact of the base effects due to which the number may look high or low. He welcomed the budget for taking a calibrated stance by focusing on capital expenditure given difficulties such as challenges on private consumption, and also continuing on the fiscal consolidation path as earmarked earlier. He highlighted that the monetary and fiscal policies will be working in a coordinated manner, and the former will not pass on the baton to the latter and stand still.