India Central Bank Chief Confident of Ensuring Soft Landing for the Economy

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MUMBAI: India’s central bank is not behind the curve and is confident of exiting from ultra-loose monetary policy smoothly and ensuring a soft landing for the economy, Governor Shaktikanta Das said on Friday.

Das “truly and sincerely” believes the Reserve Bank of India (RBI) is in sync with the requirements of the economy, he said at a banking event organised by the Financial Express newspaper.

“I would not agree with any perception or any sort of description that the RBI has fallen behind the curve. Just imagine if we had started increasing the rates early, what would have happened to growth?” he said in response to a question.

Das said the current high levels of retail inflation above 7% levels are largely on account of the war in Ukraine, adding that early withdrawal of accommodation or rate increases by the RBI would have not helped prevent the spike in inflation.

India’s retail inflation eased marginally in May, after touching an eight-year high of 7.79% in April, but remained above the central bank’s tolerance band for the fifth month in a row, suggesting it would hike rates for the third month in a row in August.

Das said the flexible inflation target was used during the pandemic to support growth but sustained increases in prices have made tackling inflation a priority, though growth cannot be totally ignored.

“The process of coming out of accommodation has taken a little longer because of things which happened beyond our control,” Das said.

“Even at this point in time, we remain confident that we will come out of it very smoothly and we are targeting a soft landing,” he added.

At the same event, India’s chief economic adviser V. Anantha Nageshwaran said the government is open to taking more steps to curb inflation if and when required, but there would be a cost to it.

Such measures would have an impact on the government’s fiscal position and on interest rates, so any moves need to be carefully thought and well-calibrated, he said. (Reuters)