Inflationary monetary policy must continue, according to RBI Governor Shaktikanta Das

 Inflationary monetary policy must continue, according to RBI Governor Shaktikanta Das

Shaktikanta Das, governor of the Reserve Bank of India, brought attention to the problems with financial stability, slowing GDP, and inflation at the opening session of the Kautilya Economic Conclave 2023 on Friday.

Das emphasized a monetary strategy that actively discourages inflation. The RBI Governor emphasized that monetary policy must continue to be deflationary in order for the rate of inflation to gently decrease from its high of 7.44% in July.

He said there is no space for complacency since monetary policy is difficult.

The RBI Governor discussed the issues facing the world and how they are affecting inflation.

"The world economy is now dealing with a slew of difficulties. The steady reduction of inflation is the first issue, and it is being disrupted by repeated and overlapping shocks. Second, growth is sluggish, and those impediments are also new and improved. Third, potential threats to financial stability. With price stability as their top priority, central banks have aggressively increased policy rates while indicating they would do so for longer. Some central banks have stopped raising interest rates. This endeavor has been constrained by worries about financial stability.Financial markets are now very responsive to any fresh information. In the midst of such a convergence of forces, policymaking has become very difficult. Although there may be a conflict between the demands for pricing and financial stability, policymakers must strike a delicate balance because, as Governor Das said on Friday, "price and financial stability support one other in the medium to long term.

The RBI Governor said that Indian banks will be able to sustain minimum capital requirements even amid stressful circumstances with reference to the domestic financial industry.

According to Das, India is positioned to replace China as the main driver of global development, and the country's GDP is predicted to expand by 6.5% in the current fiscal year, which ends in March 2024.

In September, retail inflation decreased to 5.02% yearly, a three-month low. In August and September 2022, the Consumer Price Index (CPI) was 6.83% and 7.41%, respectively. The rate of inflation peaked in July at 7.44%.