News

Published: May 25, 2023
Updated: May 25, 2023

RBI Governor Shaktikanta Das Stresses Vigilance in Continued Battle against Inflation

In a recent address at the Confederation of Indian Industry Annual Session 2023, Reserve Bank of India (RBI) Governor Shaktikanta Das emphasised the ongoing fight against inflation in India. While acknowledging the recent moderation in inflation, Das urged against complacency, highlighting the need to remain alert and monitor the impact of El Nino. Additionally, he shared positive projections for India's GDP growth, while acknowledging potential challenges in the global landscape.

Upholding Vigilance in the War against Inflation:

India's battle against inflation is far from over, warns RBI Governor Shaktikanta Das. Despite recent moderation, Das stressed the importance of maintaining vigilance and avoiding complacency in the fight against inflation. He emphasized the need to remain alert and closely monitor the potential impact of El Nino, which could have implications for inflation.

Positive Outlook for India's Economy

Das expressed optimism about India's economic outlook. He expects the next retail inflation print to be lower than 4.7%, indicating a positive trend. Furthermore, he projected GDP growth for 2022-23 to exceed 7%, signifying a strong economic performance. Looking ahead to FY24, India's GDP is anticipated to grow by 6.5%, indicating continued growth momentum.

Sectoral Analysis Reveals Promising Signs:

Sectoral analysis reveals promising signs for the Indian economy. Das highlighted the agriculture sector's strong performance, supported by expectations of a normal monsoon. Additionally, the service sector has gained momentum, contributing significantly to overall economic growth. There is also evidence of increased private investment, particularly in the cement and steel sectors, further bolstering economic prospects.

El Nino worries persist:

While positive projections exist, there are potential downside factors that need to be considered. Geopolitical uncertainties and the drag from merchandise exports pose challenges to India's economic stability. Furthermore, the predictions of El Nino could potentially impact the economy, warranting cautious observation and proactive measures.

Banking sector resilient:

Das provided reassurance regarding the stability and resilience of India's banking sector. He highlighted the strong capital and liquidity positions of Indian banks, along with improving asset quality. This stability enables the RBI to ensure adequate liquidity to meet the production requirements of the economy, supporting overall economic growth.

In terms of asset quality and non-performing assets (NPA), Das mentioned that as of December 2022, gross non-performing assets (GNPAs) in Indian banks stood at 4.4%. Furthermore, unaudited figures as of March 2023 suggest a further improvement in asset quality, pending official audit. These positive trends demonstrate progress in addressing the issue of NPAs.

Rate hikes will depend on evolving scenario:

Das clarified the factors influencing policy rates, stating that interest rate hike decisions depend on the on-ground situation. He emphasized that pausing interest rate hikes is not solely within his authority and is contingent on prevailing economic circumstances. This approach ensures that monetary policy decisions align with the needs and conditions of the Indian economy.

RBI Governor Shaktikanta Das reiterates the need for continued vigilance in the battle against inflation, despite recent moderation. He emphasizes the importance of monitoring the impact of El Nino on the economy and acknowledges potential challenges in the global landscape. Das shares positive growth projections for India's GDP, highlighting the agriculture and service sectors as contributing factors. He also assures the stability and resilience of the banking sector, while providing updates on asset quality and NPAs. Finally, Das clarifies that interest rate decisions are contingent on prevailing economic circumstances to ensure effective monetary policy.