Good coordination with government on policy measures, says RBI Governor Shaktikanta Das

PTI Mumbai | Updated on December 05, 2019

RBI Governor Shaktikanta Das addresses the press after the RBI MPC meet in Mumbai, December 4, 2019   -  Paul Noronha

Reserve Bank Governor Shaktikanta Das, on Thursday, said that there was good coordination between the fiscal and monetary policies so far, in addressing growth concerns and that the central bank is not worried about government missing fiscal deficit target.

He also said that the RBI would, however, like to see greater clarity on the impact on the government’s counter-cyclical measures to push growth, stressing that the central bank is “not worried” over the government missing the fiscal deficit target.

On the fiscal deficit overshooting the budgeted targets by October itself at 102 per cent, the bureaucrat- turned-central banker explained that usually the fiscal gap goes up in the second and third quarter and comes down in the fourth quarter as revenue mop-up increases and suggested to should wait for the final numbers.

On growth, which has been lagging by a wide margin so far, he said there are some green-shoots which are emerging, but it will be too early to comment on their sustainability.

Rising inflation

Das said that inflation is seen rising in the near-term, but is likely to moderate below the 4 per cent target by the second quarter of FY21. He, however, warned that the tariff hikes of over 40 per cent by all telcos will have an adverse impact on core inflation, which has been so far trending below the 4 percent-mark.

In a surprise move, the RBI kept the key policy rate unchanged at 5.15 percent, a nine-year low, but maintained the accommodative stance to support the economy.

The central bank also revised GDP growth estimate sharply downwards to the tune of 110 bps to 5 percent from its October policy, and increased the headline inflation targets.

“The Monetary Policy Committee recognises that there is monetary policy space for future action. However, given the evolving growth-inflation dynamics, the panel felt it appropriate to take a pause now,” it said.

This is first time in 2019 that the RBI has chosen to pause, after having delivered cumulative cuts of 1.35 percent in five consecutive actions.

Published on December 05, 2019

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