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RBI not as surprised as others on slowing GDP growth: Shaktikanta Das

The Reserve Bank of India (RBI) was not as surprised as others over country's slowing GDP growth as it had earlier noticed growth momentum slowing, said Governor Shaktikanta Das on Monday.

25th February 2020 | 10:10 AM (IST)
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While the sharper-than-expected economic downturn in India may have shocked many, the Reserve Bank of India (RBI) started cutting interest rates well in advance in February last year as it had noticed signals of slowing growth momentum, governor Shaktikanta Das said on Monday.

During a fireside chat at the 13th Mint Annual Banking Conclave in Mumbai, Das said RBI’s monetary policy committee recognizes that there is space for further rate cuts even as it keeps an eye on inflation.

The governor said that 2019 was a very unusual year as no one thought that growth could slow to 5% at the beginning of the year. The first advance estimates of India’s gross domestic product for the year to 31 March, released last month, has pegged economic growth at 5%, the slowest in 11 years.

“It was a complete surprise for everyone. Having said so, I would like to say that perhaps the RBI was among the early ones that noticed that the growth momentum was slowing down," said Das. RBI cut its key policy rate by 135 basis points (bps) between February and October last year.

Das reiterated the monetary policy committee’s (MPC) intent in terms of the accommodative stance. “This time also, the MPC, while recognizing that inflation has spiked and we need to wait for more data to see that moderation in inflation is well entrenched... the MPC does recognize very clearly that there is space for rate cuts," he said.

RBI is faced with the dual challenge of rising inflation and a slowing economy, and as three members of MPC highlighted in the last meeting, structural reforms are now inescapable.

Meanwhile, India’s retail inflation accelerated to 7.59% in January, beyond RBI’s targeted range. In February, the rate-setting committee had to revise its inflation expectations as measured by the consumer price index (CPI) upwards to 6.5% for the fourth quarter of FY20, higher than its mandated corridor of 2-6%.

Meanwhile, India’s retail inflation accelerated to 7.59% in January, beyond RBI’s targeted range. In February, the rate-setting committee had to revise its inflation expectations as measured by the consumer price index (CPI) upwards to 6.5% for the fourth quarter of FY20, higher than its mandated corridor of 2-6%.

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25th February 2020 | 10:10 AM (IST)
74 views
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