Shaktikanta Das, the Governor of the Reserve Bank, emphasized the central bank's unwavering commitment to reducing inflation to the targeted 4 percent. He stressed the importance of forward-looking monetary policy, cautioning against a policy approach that solely relies on past data. To illustrate his point, he likened monetary policy to driving a car on a road filled with potential hazards. Das explained that a driver must anticipate and adjust the car's speed accordingly, and reacting too late to an obstacle, such as a speed bump, can lead to accidents.
During his address at the 'Art of Monetary Policy Making: The Indian Context' event at the Delhi School of Economics (DSE) Diamond Jubilee Distinguished Lecture, Shaktikanta Das also noted that the recent surge in global inflation and the preceding shocks of the pandemic and the Russia-Ukraine conflict have presented significant challenges for monetary policy.
Das highlighted the evolution of India's monetary policy framework, noting that the emphasis on inflation, growth, and financial stability has varied across different monetary policy regimes. He acknowledged the need for a flexible approach that adapts to changing economic conditions.
The RBI, under Das's leadership, has taken several initiatives to enhance the regulation and supervision of banks, non-banking financial companies (NBFCs), and other financial entities. The central bank has adopted a prudent approach, navigating through economic turbulence with agility.
Das emphasized the importance of timely supply-side interventions by the government to mitigate the severity and duration of food price shocks. He acknowledged the risk posed by recurring food price shocks to anchoring inflation expectations. Consumer price-based inflation (CPI) recently reached a 15-month high of 7.44 percent in July, primarily due to rising prices of various food items.
The Reserve Bank's mandate includes maintaining price stability while considering the objective of economic growth. Price stability is defined as achieving a headline CPI inflation target of 4.0 percent with a tolerance band of +/- 2 percent. The central bank remains resolute in its commitment to align inflation with the 4 percent target.
In conclusion, Shaktikanta Das emphasized the importance of forward-looking monetary policy, adaptability to changing economic conditions, and the need for timely supply-side interventions to manage inflation and ensure economic stability.
