IGI Logo

The Reserve Bank of India (RBI) Governor Shaktikanta Das has said that the monetary policy has to be ‘clearly and unambiguously’ focused on inflation in an environment like the current one, where growth is steady. Amid a debate around neutral rates, he said theoretical and abstract concepts as arrived at are based on a person’s judgment and cannot determine the policy in the real world. It can be noted that the RBI has been steadfastly maintaining the status quo on interest rates, and there is increasing dissent among some members of the rate-setting panel who are in favour of rate cuts to promote economic growth lately. 

Talking about the impact on growth because of the elevated interest rates, Das said that the growth has been robust even with the current interest rates and the RBI is optimistic that its 7.2 per cent real GDP expansion estimate for FY25 is being achieved. Moreover, the nowcast team is pointing towards a 7.4 per cent growth in the June quarter (Q1FY25) as against the monetary policy committee’s expectation of 7.3 per cent, and that the momentum will continue into the Q2 as well. In the last three years, the average growth of India has been 8.3 per cent. 

The Governor further said the RBI is looking specifically on the food inflation front, and also if there is a spillover of - Wholesale Price Inflation (WPI), which moved up to a 16-month high for June into consumer price inflation. He said ‘it is the food inflation which is drawing our greatest attention because that is actually giving the push to the headline numbers because core and fuel inflation are quite low. Food inflation is the worry’.