Reserve Bank of India Governor Shaktikanta Das on Wednesday said the consumer price-based index (CPI) which accelerated to 5.5 per cent in September, is likely to escalate further in October. The Governor stated that the change in monetary policy stance in the October policy to ‘neutral’ from ‘withdrawal of accommodation’ should not be interpreted as a cut in the repo rate in the next policy, dampening hopes of the much-awaited reduction in the key policy rate. He was responding to a question that there has been some disconnect between the RBI’s change in stance in the October 2024 policy and his subsequent statements in various speeches that there are “significant upside risks to inflation”. “I had said in my monetary policy statement (on October 9, 2024) very clearly that in September and October, the inflation prints are expected to be higher. September came at 5.5 per cent. I reiterate today that the October CPI number is again going to be very high, perhaps higher than the September (CPI) number,” he said at the BFSL Insight Summit, organised by the Business Standard newspaper. Retail inflation surged to a nine-month high of 5.49 per cent in September from 3.65 per cent in August, mainly due to a rise in food prices especially of fruits and vegetables, data released by the National Statistical Office (NSO) showed. The October CPI print will be released by the NSSO next week. The repo rate, which has been steady for 20 consecutive months, currently stands at 6.5 per cent. While a majority of economists have pencilled in a repo rate cut in the December 2024 monetary policy meeting, a section of analysts expects a reduction in the February 2025 policy meeting. To a query on the change in monetary policy stance in October policy and his statements indicating inflation remains a significant risk, Das said the RBI’s communication has been very consistent that a change in the stance gives the banking regulator optionality and flexibility to decide the future course of action. “We have to be very cautious in our future course of action. A change in stance doesn't mean that the next step (by the RBI) is a rate cut in the very next meeting. It's not so,” Das stated. On the economy, Das said that the 70-80 high-speed indicators, which the RBI monitors, show that only IIP numbers and FMCG sales in the urban sector have considerably moderated. However, the GST, e-way bills, toll collections, air passenger traffic, performances of steel and cement industries and the automobile sector in October have done well. “So overall, if you see the incoming data present a mixed picture, where the positives outweigh the negatives,” Das said. On the impact of US presidential results on India, the Governor said that irrespective of the global developments and the outcome of the US elections, and the kind of spillovers it will have on the rest of the world, the Indian economy and the financial sector is currently well placed, and very resilient to deal with any kind of spillovers. When asked about the recent ban on 4 NBFCs from sanctioning and disbursing loans for violation of various rules, including charging excessive pricing of loans, Das said there are 9,400 NBFCs, and action has been taken on only 4 entities. The four NBFCs included Asirvad Micro Finance Ltd promoted by Manappuram Finance, Arohan Financial Services Ltd, Mitsubishi-backed DMI Finance and Navi Finserv, founded by former Flipkart founder Sachin Bansal. Das said the action was preceded by months of direct bilateral engagement with the individual NBFCs. “Our action is not punitive, but corrective,” he said, adding that once the regulatory compliances are being met, the RBI withdraws the restrictions.
