RBI Guv pitches for continued policy support to revive growth

Reserve Bank governor Shaktikanta Das opined that continued policy support with a focus on revival and sustenance of growth was the most desirable and judicious policy option at the moment. Das, according to the minutes of the MPC meeting released on Friday, also underlined the need for closely monitoring the price situation with a view to anchoring inflation expectations.

“The need of the hour is twofold: first, continue the monetary policy support to the economy; and second, remain watchful of any durable inflationary pressures and sustained price momentum in key components so as to bring back the CPI inflation to 4% over a period of time in a non-disruptive manner,” he said.

All members of the Monetary Policy Committee (MPC) — Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Mridul K Saggar, Michael Debabrata Patra, and Shaktikanta Das — had unanimously voted to keep the policy repo rate unchanged at 4% after the three-day meet of the panel earlier this month.

Further, except Varma, other members voted to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy, while ensuring that inflation remains within the target going forward. Varma expressed reservations on this part of the MPC resolution, according to the minutes.

RBI Deputy Governor Patra said amid the extreme uncertainty encircling the path of the pandemic, monetary policy authorities have sought to impart some certainty by a commitment to a stance of accommodation extending into the future.

With the upsurge of inflation worldwide, this effort to anchor expectations is under scrutiny. Patra said in some countries, markets have acquiesced with the authorities’ view that inflation pressures are transitory and do not warrant a change in the policy stance.

In others, central banks have pre-emptively tightened the policy stance despite assessing inflation as transitory.

“This is a razor’s edge dilemma and responding to it, in my view, involves a judgment call that puts both foresightedness and inflation-fighting credibility on the line,” he said.