Money & Banking

RBI says growth variables point to ‘slowing down'

Our Bureau Bangalore | Updated on March 12, 2018

The March IIP numbers reinforce that growth is slowing, said Dr Subir Gokarn, Deputy Governor of RBI, here on Friday.

Though as a single indicator of growth activity, the IIP data is a little inadequate at this point, he said, adding that other variables too suggest that “there is a sort of a slowing down which we have been saying for quite some time now,” he said on the sidelines of a CII event.

He explained that the RBI had said in April that the interest rate cycle had turned and the progress of that cycle will depend on the overall assessment of growth and inflation prospects.

On the changes announced in the currency market, Dr Gokarn said the measures were “motivated by the pressures that we see in the market and they are also based on calculations about costs and benefits”. Terming it a “very delicate balancing act”, he said that the timing and choice of instruments is based on those concerns.

“We have the power, capacity, instruments and the rupee is behaving in a way which suggests instability and risks of a very sharp depreciation, and we will use those instruments,” he added. The RBI was trying to curb volatility and is “using instruments that we think are appropriate in any situation. And we will continue to curb. Volatility is the main motivation for our actions and responses,” said Dr Gokarn.

Speaking at the event, he said that the large currency depreciation was a result of global volatility of capital flows. “Capital inflows are volatile and uncertain now than in 2003-08, and oil prices rather firm,” he said.

On high oil prices, Dr Gokarn said that there was an immediate need to fill the large gap between global fuel prices and domestic prices. “Adjustment is very critical. We are not in a high growth phase right now, and that suggests that pass-through risk of energy prices is not so high,” he added.

On the interest rate movement, he said that the rate movement hinges on how growth-inflation pans out, but indicated that interest rates were unlikely to rise. “We are entering a phase of stable growth-inflation dynamics,” said Dr Gokarn.

Published on May 11, 2012

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