Right moves. Keeping an ‘Arjuna’s eye’ on inflation, says RBI Governor

The Reserve Bank of India’s constant endeavor is to keep an “Arjuna’s eye” on inflation, which is its primary target, according to Governor Shaktikanta Das.

Noting that domestic inflation remains elevated, he said RBI is closely monitoring the inflation trends as well as the effect of its past actions.

The central bank’s view is that price stability, sustained growth and financial stability need not be mutually exclusive.

Retail inflation has been in breach of the 2-6 per cent target range for three successive quarters till September 2022, averaging 6.3 per cent, 7.3 per cent and 7 per cent in January-March, April-June and July-September quarters, respectively.

Das likened RBI’s inflation fight to the laser-focus approach of Arjuna in the epic Mahabharata. “In the Mahabharata, during the famous Swayamvara, when the great warrior Arjuna aimed at the eye of the revolving fish through the pool of water below, he would have certainly assessed the speed at which the fish was revolving, the wind conditions, the intensity of the ripples in the pool of water, the noise levels in the king’s court and similar other factors.

“No one can match the prowess of Arjuna, but our constant endeavor is to keep an Arjuna’s eye on inflation, which is our primary target,” the Governor said at the IBA-FICCI Annual Banking conclave .

At the same time, the RBI keeps assessing other related factors like the evolving inflation-growth dynamics; soft indicators like its surveys on consumers and businesses; global macroeconomic, financial and commodity market developments; and financial stability.

“In other words, our policy measures are based on an assessment of the overall situation. We will continue to steer our policies accordingly,” said Das.

The Governor observed that the triple shocks of Covid, war in Ukraine and the current financial market turmoil have created a toxic mix of factors and circumstances which every country has to grapple with.

“This confluence of factors and circumstances is reverberating speedily across countries and jurisdictions...

“In this unsettling global environment, the Indian economy has been growing steadily, drawing strength from its macroeconomic fundamentals and buffers,” Das said.

India’s recovery and growth have been more broad-based, he added.

“Our policies – fiscal, monetary and regulatory – were prudent, targeted and time-bound. We were careful to ensure that demand remained in balance while supply conditions improved.

“As per the high frequency indicators (HFIs) for the recent months, private consumption – especially urban demand – has remained healthy. The contact-intensive services have continued to make smart rebound, aided by unfettered resumption of activities and full-fledged celebration of festivals after two and half years,” the Governor said.

External demand, however, remains a weak spot in the face of accentuating global economic slowdown.

“The current global economy is sailing in extremely turbulent waters. Despite humungous challenges, the Indian economy has progressed relatively well.

“I would like to impress upon the banks and businesses to remain focussed on reinforcing their resilience while continuing to grow and meet market demand,” Das said.

He asked them to continuously assess the risk build-up, if any, sharpen governance and strive to maintain healthy levels of capital and other buffers.

“So far as the RBI is concerned, we remain committed to support and preserve macroeconomic and financial stability. Once again, it is a moment of ‘whatever it takes’,” he concluded.

COMMENT NOW