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RBI does not feel there is a need to revise the inflation target 4 per cent, Governor Shaktikanta Das said, adding that it would be too early to shift the goal post as the target has a certain meaning.
“RBI’s target of 4 per cent, plus or minus 2 per cent, gives us sufficient flexibility in our monetary policy decision making. The MPC uses this to tolerate higher inflation rates of up to 6 per cent,” he said.
“While there could be some moderation in inflation target numbers globally, it would be too soon to shift the Indian inflation target,” Das said at an event on Friday evening, adding that the Indian economy has remained resilient despite global spillovers.
Focus on core
He, however, admitted that core inflation has remained sticky at over 6 per cent which is “definitely a concern”. “That is not a comfortable number to deal with,” he said, adding that the RBI’s focus continues to be core inflation.
The headline inflation eased to one-year low of 5.72 per cent in December from 5.88 per cent the previous month. The core inflation stood at 6.31 per cent.
Das said that if the current geo-political scenario remains the same, it could be a ‘high for long’ situation for interest rates globally, adding that we could see a growth slowdown in the US or a mild recession.
While some amount of contraction in India’s growth could also be seen, Das remains optimistic as wholesale credit demand and private capex are showing signs of improved growth. “Going forward, we should see some pickup in the wholesale sector,” he said.
‘crypto is gambling’
On cryptocurrencies, Das reiterated his earlier stance, saying that RBI believes that blockchain technology should be supported but all private cryptocurrencies should be banned as they undermine the power of central banks if allowed to grow unchecked.
“It will undermine the authority of the RBI and lead to the dollarisation of the economy,” Das said, adding “these are not empty alarm signals, this can happen”.
“The so-called crypto assets have the potential to become a means of exchange. If you allow it to grow…the RBI being the monetary authority will lose control over the money supply in the economy,” he said, adding that to “put it bluntly, crypto is gambling”.
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