Expect inflation moderating: Das
Says RBI has serious concerns about cryptocurrencies from the point of view of financial stability
The Reserve Bank of India (RBI) does not see a possibility of a sustained rise in inflation above 6 per cent, and there is no evidence to suggest that the liquidity overhang in the system has fed into generalised inflation, Governor Shaktikanta Das said on Thursday. “Our expectation is that from now onwards inflation will moderate,” Das said. On the subject of private cryptocurrencies, the RBI governor said the central bank had “serious and major concerns” about it.
THEY (CORPORATIONS) HAVE INVESTMENT PLANS, BUT THERE’S A LOT OF SLACK IN CAPACITY UTILISATION AND DEMAND. AGGREGATE DEMAND IS STILL BELOW THE PRE-PANDEMIC LEVEL,”
SHAKTIKANTA DAS, RBI GOVERNOR
The Reserve Bank of India (RBI) does not see a possibility of a sustained rise in inflation above 6 per cent, and there is no evidence to suggest that the liquidity overhang in the system has fed into generalized inflation, Governor Shaktikanta Das said on Thursday.
“Our expectation is that from now onwards inflation will moderate,” Das said.
On the subject of private cryptocurrencies, the RBI governor said the central bank had “serious and major concerns” about it.
“We have serious concerns, major concerns from the point of view of financial stability. I think we need more credible answers as to what contribution private cryptocurrencies will make to the Indian economy going forward. We need to be convinced more, and we have expressed those concerns to the government. It is now for the government to take a deci- sion,” Das said in a conversation with Financial Times and Indian Express.
Inflation at 6 per cent is “a matter of concern,” he said, “but the possibility of sustained increase in inflation above 6 per cent is very less now.” Nevertheless, the RBI remains watchful, he said, adding that the central bank is committed to achieve the medium-term target (4 per cent) over a period of time in a very non-disruptive manner.
“We are monitoring the situation very closely. RBI is an inflation focused organisation, but in the pandemic time we have decided to focus on growth. Instead of the target of 4 per cent, the monetary policy committee (MPC) has decided to operate within the band of 2-6 per cent,” Das said in the event, streamed online.
The RBI governor said there was no evidence of high asset prices, such as stock prices feeding into inflation.
Most of the recent perk up in inflation was because of supply side reasons, such as high pump prices of petrol and diesel, edible oil and pulses prices.
Expressing confidence about meeting the central bank’s growth projection of 9.5 per cent for the current fiscal, he said, “it all depends on the severity of the third wave of the pandemic should it happen.”
RBI’S accommodative stance started even before the pandemic set in because the growth was faltering. Now, “whether we will continue with the accommodative stance is something that the MPC will take a call on,” Das said. However, he also said that given the growth concerns, it is not a good time now to withdraw accommodations.
Currently, the banking sector NPA looks “quite manageable,” as the gross bad debts at the end of June came at 7.5 per cent of the advances for the banks.