Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday emphasized having an unambiguous commitment to bring down inflation to the 4 per cent target, as any wrong move at this stage could ‘severely compromise’ growth. The Governor said that inflation has been easing but the pace of moderation is slow. In May, the consumer price-based inflation (CPI) softened 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). We have to navigate our path towards the 4 per cent inflation target with a clear and unambiguous focus and commitment to bring down the inflation to the target. There cannot be any wavering or distractions at this stage because any distraction will severely compromise growth,” Das said while speaking at an event. In the policy announced on June 7, the RBI’s six-member Monetary Policy Committee (MPC) decided to leave the repo rate unchanged at 6.5 per cent for the eight consecutive policies. The Governor’s statement comes after two external members of the MPC – Jayanth Varma and Ashima Goyal – dissented from the other four members and favoured a 25 basis points (bps) cut in the repo rate. Drawing an analogy from the game of chess, Das stated that while dealing with the challenge of inflation, a single wrong move can throw one off the track and coming back to the track can be far more costly and time consuming. “There is one game where if you make a wrong move, you are finished…that is the game of chess. Therefore, as in the game of chess, we cannot afford to make any mistake or policy error or any wrong move. We have to play our game and decide our monetary policy actions primarily driven by the inflation numbers and the outlook that we have,” Das said. The RBI has projected CPI at 4.5 per cent in FY2025. Inflation is expected to be at 4.9 per cent in Q1, 3.8 per cent in Q3, 4.6 per cent in Q3 and 4.5 per cent in Q4. On growth, the Governor said the growth in the country is well sustained and the outlook for the current year looks very optimistic. “We are very sanguine about the fact that India will record 7.2 per cent growth in the current year (FY2025),” Das said. He said in Q4 FY2024, the country recorded a gross domestic product (GDP) growth rate of 7.8 per cent and growth in the first quarter of this financial year is estimated at 7.3 per cent. Das said the growth momentum continues to be strong and rural consumption, which was lagging for a long time, has now picked up. The external demand has also gained traction. “Government capital expenditure has sustained the growth story over the last three years in the post-COVID period, but now private sector investment is picking up in specific sectors including cement and steel,” he said. Das, however, said the risks to growth include weather-related events, frequent geo-political conflicts, fragmentation in global trade and capital flows and a possibility of heightened financial sector volatility.
