 "Shaktikanta Das, Shaktikanta, RBI Governor")
However, he reiterated that the RBI must remain watchful of how the forces impacting inflation play out | (Photo: PTI)
The India story remains intact despite gross domestic product growth (GDP) slowing down in the first quarter, said Shaktikanta Das, governor of the Reserve Bank of India (RBI), noting that consumption and investments are expanding.
Das said that new members to the monetary policy committee (MPC) — the RBI’s rate-setting body — will be appointed in time. “New MPC members have to be appointed. Then only can we hold the meetings. So, it should happen. We expect the new members to be appointed on time,” he said on the sidelines of an event organised by business chamber FICCI and the Indian Banks’ Association in Mumbai.
The balance between inflation and growth is well poised. “With the monsoon progressing well and the healthy kharif sowing raising prospects of a better harvest, there is greater optimism that the food inflation outlook could become more favourable over the course of the year,” he said.
He reiterated that the RBI must remain watchful of how forces impacting inflation play out. “We must successfully navigate the last mile of disinflation and preserve the credibility of the flexible inflation targeting framework, which is a major structural reform. The best contribution that monetary policy can make for sustainable growth is to maintain price stability.”
Das said it is evident India is on a sustained growth path, adding that the headline GDP number was lower than expectations due to muted government expenditure by the Centre and the states, possibly due to the Lok Sabha elections. Excluding government consumption expenditure, GDP growth would have worked out to 7.4 per cent. (Growth slowed to 6.7 per cent year-on-year in the April-June quarter.)
“Consumption and investment demand, the two main drivers of growth, are growing in tandem. Government expenditure of the Centre and the states is likely to pick up pace in line with the Budget Estimates in the remaining quarters of the year.”
According to Das, higher domestic consumption would insulate the economy from the vagaries of external uncertainties. “Investment remains critical for the sustainable growth of the economy and, given the current confluence of favourable factors, it is time for the private corporate sector to come forward in a big way.”
“The potential of external demand can be utilised to our advantage by integrating into global supply chains,” he said.
Das listed six reforms that have helped India’s growth. These include shifting from an administered exchange rate of the rupee to a market-determined regime, stopping the automatic monetisation of Budget deficit financing by the RBI, enactment of the FRBM Act, introduction of the flexible inflation targeting framework, enactment of the Insolvency and Bankruptcy Code, and implementation of the Goods and Services Tax.
“Each of these six reforms has yielded long-term positive outcomes,” he said, adding that the measures need to be augmented by reforms in land, labour, and agricultural markets.
“While we have made some progress in these areas, a lot more needs to be done both at the national and sub-national levels. Improvements in ease of doing business, especially at local levels, will boost our competitiveness.”
First Published: Sep 05 2024 | 1:17 PM IST
