Reserve Bank of India (RBI) Governor Shaktikanta Das has indicated that the central bank might consider changing the course of the monetary policy without giving any “sudden shock or any sudden surprises to the markets” when the revival of economic activity shows signs of durability and sustainability.
“We are fully conscious and will not try to make any changes which take the market by surprise,” Das told CNBC in an interview. “All our actions will be calibrated, they will be well-timed, they will be cautious and they will keep in mind aspects like what you are mentioning. We don’t want to give any sudden shock or any sudden surprises to the markets.”
“Once we are convinced that the economic recovery process — which is as I’ve said a couple of days earlier is now delicately poised — and the revival of economic activity shows signs of durability and sustainability, I think that should be an appropriate time for the RBI or for the monetary policy to perhaps consider change in our course,” he said.
“At this point of time, we are watching the revival of the economic activity — there is still uncertainty prevailing around the pandemic,” Das said. “Today morning, I was looking at the new cases in India and they have again inched up to about 46,000 new cases, compared to about between 30-40,000 new cases almost on a daily basis,” he said.
“Our effort has been to nurture the recovery process, and it is satisfying to note that the economy and all activities have responded well to the impulses which were generated from the central bank,” Das said. “Now we are in a situation where the inflation seems to be spiking up.”
It has, in fact, remained upwards of 5 per cent — in between, it exceeded 6 per cent. But now it has gone below 6 per cent — which is the upper band, he said.
“The RBI’s effort and the effort of the Monetary Policy Committee has been — first, it switched over to an accommodative stance, reduced the policy rates, and the effort was to create congenial financial conditions in which the economy can come back to normalcy,” he said. “… we have taken about 100-odd measures since March last year to mitigate the impact of Covid on the economy. So, our effort has been to nurture the economy by providing material financial conditions and various policy measures — monetary and regulatory policy included some relaxations with regard to the banking sector and other aspects of the financial sector,” he said.