RBI Governor Das: The Foundation of Long-term Growth is Stable Inflation

Reserve Bank of India (RBI) Governor Shaktikanta Das stated on Thursday that stable inflation is the cornerstone of long-term growth because it increases people's purchasing power and creates a steady investment climate.

Speaking at the High-Level Policy Conference of Central Banks in Mumbai, Das stated, "It acts as a bedrock for sustained growth, enhances the purchasing power of the people, and provides a stable environment for investment."

In order for economic agents to plan ahead, lower uncertainty and the inflation risk premium, and promote savings and investment—all of which increase an economy's potential growth rate—price stability is equally as important as growth, the governor emphasized.

Although the panel agreed to maintain policy rates at the most recent MPC meeting in October, they shifted their position to "neutral," which sparked rumors of a possible rate drop in December.

During its meeting with the boards of private banks in Mumbai on Monday, the Reserve Bank of India (RBI) is anticipated to provide general clues regarding the implementation of the expected credit loss (ECL) framework.

The RBI Bulletin reports that India's REER in FY24 was below normal norms.

However, worries about domestic growth are beginning to surface. However, the RBI bulletin for November sounded upbeat about growth, stating that private consumption was once again driving domestic demand and that the bright expectations for the rabi crop boded well for farm income and demand in rural areas.

According to the RBI's health of the economy report, however, rising prices if left unchecked would jeopardize the prospects of the real economy. It also cautioned about the impact of rising food costs on headlines and called the increase in core inflation a "worry."

The governor stated on Thursday that the RBI has actively anchored expectations through communication. "We combined rate and liquidity operations with appropriate forward guidance when conditions warranted to increase the effectiveness of our policies," he said.

Das further pointed out that the size of the RBI's balance sheet had returned to its initial level within three years or so of the pandemic's onset. "That is to say, the infusion of liquidity that was implemented during the pandemic has been withdrawn," he stated.