Monetary policy meeting: We are not behind the curve, says RBI

The rates - whether repo or reverse repo - present a particular stance. They are reflective of the stance adopted by the RBI, said RBI Governor Shaktikanta Das

After the monetary policy meeting, the top management of the Reserve Bank of India (RBI), which included Governor Shaktikanta Das and Deputy Governors Michael Patra, T Rabi Sankar, and Rajeshwar Rao, spoke to reporters on a range of issues. Edited Excerpts:

What is the reason behind not hiking the repo rate? Central banks all over the world are concerned about inflation. But the RBI seems comfortable as it has projected 4.5 per cent CPI (consumer price index) inflation for FY23. What gives you that comfort?

Das: The rates — whether repo or reverse repo — present a particular stance.  They are reflective of the stance adopted by the RBI. So, since the stance continues, we did not see any reason to make any changes in the rates. On inflation we have done our homework — a very detailed analysis, based on which we have given the projection of 4.5 per cent.

Patra: The character of inflation, for example in the US, is different from that in India. For instance, one thing that is driving US inflation is used cars. That is not the basis for inflation, nor are we importing used cars. We have a material difference in the way our inflation is evolving. So, we have to respond differently to the entire inflation evolution.

What is the oil price assumption to this inflation forecast?

Das: Our forecasts are benchmarked to international crude prices. We have examined various scenarios on where the crude oil price will be. Based on that we have given this projection.

The projection for year-on-year growth of 7.8 per cent for FY23 suggests that there is a discomfort on the underlying momentum. What is the reason for

this discomfort?

Das: The inherent momentum of growth is positive; it is picking up. It is primarily due to base effects.

Don’t you think fiscal policy is more appropriate to deal with the uneven recovery?

Das: When it comes to fiscal policy and monetary policy, you cannot see that as “either” “or”. It has to be a coordinated approach, particularly in these difficult times. The growth momentum is positive. In my statement I have clearly spelt out that private investment, the consumption demand … they are still lagging. The fiscal action is calibrated. They have expanded capital expenditure and at the same time there is an effort towards fiscal consolidation so as to reach the target, which the finance minister gave in the speech last year — 2025-26. They are on a particular road map. So far as the RBI is concerned, we are also on a particular road map. Definitely, fiscal policy has an important role at the current juncture. And we feel the RBI has to be supportive to make growth sustainable and durable.

You said the rates — reverse repo and repo — were not changed because the stance remained unchanged. Does that mean even the reverse repo rate can be increased only when the stance is changed to neutral. Also, are you open to expanding the RBI balance sheet via open market purchases, given the large borrowing programme next fiscal?

Das: These are all future actions. In my statement, we have said all our actions will be calibrated and well telegraphed. So as and when we decide something we will spell it out and give guidance.

Patra: The rates reflect our stance. What we do next is not appropriate for me to state but we will follow a calibrated and well-telegraphed approach.

The markets were expecting some cues on accommodation when the global central banks seem to be tightening. Do you see the risk of the RBI falling behind the curve?

Das: Our policy is driven by evolving domestic inflation and the growth scenario. Price stability is uppermost in our mind but at the same time we are mindful of the need to support growth and make it more sustainable. So, we are not behind the curve. Global central banks are following a different path, which is because of their domestic factors. Our domestic factors are different from them.