Pausing rate hikes is not in my hands, will be driven by on-ground situation: RBI Governor Shaktikanta Das

Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday said that change in interest rates or pausing rate hikes is not in his hands as the revision depends on external and internal factors.  

“Pausing interest rate hikes is not in my hands," said RBI Governor Shaktikanta Das at the Confederation of Indian Industry Annual Session (2023). "It's not a decision which is entirely in my hands because I am driven by what is happening at the ground level," he added.

Das' comments came on the back of CII President Sanjiv Bajaj’s address where he said that he is hopeful that the current economic situation will aid in pausing rate hikes.

Bajaj added the industry has welcomed the RBI's decision to decouple from the global monetary policy tightening cycle. He said he was hoping the RBI is able to cut rates soon if the situation so demands. He said the corporate balance sheets have been deleveraged, the banking sector's balance sheets are also now very healthy.

Das, while discussing about inflation and related concerns, said it is moderated but there is no room for complacency. He said in February last year, the inflation outlook was very benign. "We assumed it will moderate, but then we had the big surprise from the Russia-Ukraine war," he said.

Mentioning the surprise MPC meeting, which the central bank had organised just after the war, Das said the subsequent events have proved the meet was the right decision.

"Last MPC, we gave you a positive surprise, by giving a pause because our assessment was that we have done a 250 bps increase let's allow the monetary policy to play out and transmit. We monitor the transmission in the credit side, liability side as well," he said.

He said the war on inflation is not over. "We have to remain alert, no cause for complacency," he said.

On global recession fears and slowdown, Das said:  “Financial markets remain volatile as uncertainty over future monetary policy path is keeping market sentiments on the edge... On the upside, global growth is being supported by the easing of supply chain disruptions, gradual normalisation of energy and food markets, easing of commodity prices and reopening of the Chinese economy. Global inflationary pressures are also showing signs of abetment, though they remain well above the target in most of the countries.”

The RBI Monetary Policy meeting is scheduled to take place from June 3-6. In its last meeting in April, the central bank had kept the repo rate unchanged at 6.5 per cent.

Analysing the global growth parameters, the central bank governor said: “The IMF's World Economic Outlook of April 2023 projects global growth to decelerate from 3.4 per cent in 2022 to 2.8 per cent in 2023 before rising again to 3 per cent in 2024. The economic slowdown is, however, concentrated in advanced economies, with the Asia-Pacific region expected to contribute about 70 per cent of global growth in 2023. According to the same estimates, India will contribute about 15 per cent to global growth in the current year.”

 Talking about India's economy he said, it is expected to grow 7 per cent with a possibility that it could be more. "I won't be surprised if the FY23 growth comes slightly above 7 per cent," he said.

 

Also read: Informal surveys showed that Rs 2,000 banknotes were not commonly used: RBI Governor Das

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