RBI Governor Shaktikanta Das Stresses Continued Disinflationary Focus at World Economic Forum

Ira Singh
Khabar Khabaron Ki,18 Jan’24

In a keynote address at the World Economic Forum in Davos, Reserve Bank of India (RBI) Governor Shaktikanta Das emphasized the importance of maintaining an actively disinflationary monetary policy for India, despite a recent drop in core inflation.While acknowledging the decline in core inflation,Das emphasized the need to maintain a disinflationary stance until headline inflation consistently reaches the target of 4%.He noted the global geopolitical situation’s volatility and its potential impact on economies, particularly regarding food inflation.Das also highlighted the RBI’s intervention in the exchange rate market to prevent undue volatility, emphasizing the stability of the rupee.

Das said he expects January inflation to moderate and the trend has been moderating but unless inflation reaches 4 per cent on a durable basis, the bank cannot get lulled into a complacency or think of changing its policy focus.Annual retail inflation rose 5.69 per cent in December, the fastest pace in four months but core inflation dropped to a four-year low of 3.8 per cent from around 4.1 per cent in November.

Das, whose term is ends in December, would be the longest serving RBI governor since the 1991 liberalisation.

He has led the world’s fifth largest economy since 2018, keeping inflation and the currency relatively stable through successive shocks including the failure of a large non-bank lender, Covid-19 and the Ukraine war.

“Outcome of the financial stability, macroeconomic stability and return of capital flows has been that the rupee has been very stable. It is not because of RBI’s intervention of trying to keep the rupee at a particular level,” Das said on Wednesday.He said the central bank would look to opportunistically buy dollars when there are large inflows to ensure there is no sudden large appreciation in the currency.

The central bank would like to continue to build foreign exchange reserves, which currently stand at near 22-month highs of $617 billion, as it wants to avoid the large depreciation pressure seen on the rupee due to sudden capital outflows witnessed during the 2013 taper tantrum, Das said.