Reserve Bank of India (RBI) governor Shaktikanta Das categorically affirmed that he saw no loosening of monetary policy around the corner, given that retail inflation continues to trend above the central bank's target of 4%.
Responding to media queries, Das said that a few months of good data should not push the RBI into complacency.
"It would be mistake to think that we are giving any signal that we are moving towards neutral," said the governor.
He further added: “The law requires us to maintain the inflation at 4%. Last year May, we changed our stance to give priority to inflation over growth. There is no change in that stand… Inflation is our top priority now. We are still a long distance to cover to reach 4%,” the RBI governor told media at the post the post-monetary policy press conference.
The governor was equally emphatic in giving any forward guidance as far as change in policy rates are concerned.
“We refrain from giving any forward guidance. The future looks very fickle, news shocks can come from anywhere and hit any country. Everything depends on the evolving situation. Given this background, it is not possible for any central banks to give forward guidance,” said the RBI governor when asked if the RBI would keep the rates at elevated levels till 2025.
When asked the reason for the confidence in increasing the FY24 growth target by 50 basis points, deputy governor Michael Patra said that the first half estimate have beaten all forecasts including those of RBI, and if the first half GDP numbers and the projections (for second half of the FY24) given in the last monetary policy are taken together, the full year GDP rate is around 6.9% which is close to the new 7% projection.
“If you look at October and November high frequency data, they are all very robust. If you take October November data, you will exceed 7%. Right now, 7% looks conservative,” said the deputy governor.
On concerns over sluggish rural growth, governor Das elaborated: “Despite late rabi sowing, it has completed 2/3rd this season, two-wheelers sales have seen a significant turnaround this festive season with 20.7% growth over the previous year. FMCG sales in rural areas have shown steady demand since April this year and in the second quarter they have shown a growth of 6.4%. Demand for MNREGS for the first time declined in November this year by 4%.”
On Capex, the governor said that the general Govt capex (both state and central government capex) recorded a growth of 36.7% in April and October. He also hinted at Private sector capex revival in petroleum, cement, steel and chemicals sector.