Reserve Bank Governor Shaktikanta Das on Wednesday said the “worst of inflation is behind us”. Globally also, the same trend is visible with the moderation in commodity, crude oil and several other prices, he said in a media interaction after unveiling the monetary policy. Excerpts:
India’s GDP growth is resilient. It is holding on and it is doing well in a world of slowing growth and possibilities of recession across several countries. For the Indian economy, the outlook is supported by good progress of rabi sowing, sustained urban demand, improving rural demand, a pick-up in manufacturing, rebound in services and robust credit expansion
Headline inflation is moderating. In fact, the worst of inflation is behind us. Globally also the same trend is visible with the moderation in commodity, crude oil and several other prices. While inflation is moderating and while we recognise and state that the worst of inflation is behind us, there is no room for complacency. We will have to be extremely watchful and we have to be nimble in our actions. We have to act should it become necessary.
We are ready to undertake liquidity operations to inject liquidity but we will look for durable signs of turn in the liquidity cycle.
The story of the Indian rupee is one of resilience and stability. We remain committed to act to prevent excessive volatility of our exchange rate and our focus will continue on orderly evolution of the exchange rate.
The current account deficit is eminently manageable and let there not be any doubt about it. To amplify further, the foreign exchange reserves have gone up by $524.5 billion on October 21 to $561.2 billion on December 2, and that’s an increase of $36.7 billion. Also, the external debt ratios of India are low by international standards. So overall, the status of the Indian economy is that it is resilient and I think India stands out as an island of resilience in an otherwise volatile and gloomy world.
On US Federal Reserve rate estimate:
The US Fed rate or the terminal rate is important for the whole world, as also for India, because it impacts so many aspects, particularly with regard to the currency market. But our policies are primarily governed and determined by domestic factors, the domestic scenario on growth and inflation. It is not a case that we look at the Fed policy rate and take our decision. We take our decisions on monetary policy rate stance based on our domestic factors.
Gap between credit & deposit growth:
The RBI does not give direction to banks with regard to their interest rates on either side whether credit or deposit side. The credit and deposit growth have to be seen in the proper perspective. The credit growth is on a low base, the deposit growth is on a high base, that is why they look to be so divergent. During the pandemic or even in the last year, there was hardly any credit growth, it was 5-6% – a low base. But deposit growth had picked up in the first two years of the pandemic. So, whatever is now happening on the deposit side, growth has to be seen in the context of the base effect. The banks do their asset liability management and depending on their funds requirement and their ALM assessment, they take necessary action both on the credit side as well as the deposit side.