Ashima Goyal, a member of the technical advisory committee for the Reserve Bank of India
Ashima Goyal, a member of the technical advisory committee for the Reserve Bank of India | Photo Credit: DHIRAJ SINGH

While interest rate has gone up from the pandemic lows, it is not that high, according to Monetary Policy Committee (MPC) member Ashima Goyal.

It is sufficient to allow the economic activity to recover, she said at State Bank of India’s banking and economics conclave.

During the May-September period, the MPC increased the policy repo rate by 190 basis points (bps) to tame retail inflation, which remained above the Committee’s upper tolerance level of 6 per cent for the 10 month in a row in October.

The MPC member said: “A lot of people say that interest rate has risen so much...They focus on that. But then remember in the pandemic, it was cut very very low. So, you have to come back to a normal level. It is only at a normal level...But the real rate should be positive...

“We are mild positive and that is good for the economy. It is good for anchoring inflation expectations.”

Goyal noted that India has dealt with extremes — pandemic and the war.

“There is some resilience in the economy. I think this comes from our monetary and fiscal policy as well as structural reforms being senstive to Indian conditions.

“Here we have the food grain stocks, food security and at the same time, shift in government spending towards infrastructure..... We have very good monetary-fiscal coordination,” she said.

Goyal emphasised that India’s financial sector is very strong.

“We went through 10 years of reforms/ restructuring that has brought in substantial changes...,” she said.

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