Governor Shaktikanta Das in the post-monetary policy press briefing said that the Reserve Bank of India (RBI) has put inflation ahead of growth, changing its long-held monetary policy priority of growth over inflation.
“For the last three years – since February 2019 – the RBI has given priority to growth over inflation. That has changed with this monetary policy,” the governor told the media.
The governor said that the government is gradually moving away from an ultra-accommodative stance to an accommodative stance. To buttress his point, the governor cited the normalisation of the Liquidity Adjustment Facility (LAF) with the introduction of the Standing Deposit Facility (SDF).
The SDF rate will be 25 bps below the policy rate (repo rate of 4%), and it will be applicable to overnight deposits at this stage. The Marginal Standing Facility (MSF) rate will continue to be 25 bps above the policy repo rate.
“Thus, the width of the LAF corridor is restored to the pre-pandemic configuration of 50 bps, symmetrically around the policy repo rate, which will be at the centre of the corridor,” explained the governor.
The RBI has raised the inflation estimate for the current financial year from 4.5% (announced in the February monetary policy) to 5.7% with first quarter inflation likely at 6.3%.
On whether the central bank is behind the curve as far as the rate hike is concerned, the RBI governor said this depends on who is drawing the curve.
“India’s monetary policy is compared with those of advanced economies. But advanced economies are still in the process of completely withdrawing their bond purchase programme, which we have already finished last year,” the governor said in defence of the RBI’s policy stance.
On policy rates, the governor said that the RBI is very watchful, and that it would carry out whatever action needs to be taken depending on the evolving situation.
Meanwhile, the RBI has reiterated that it is not developing any alternate rupee-rouble payment platform and that it will not do anything that goes against sanctions (on Russia).