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HomeEconomyInflation biggest challenge, but RBI has taken steps to tackle it: Shaktikanta...
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Inflation biggest challenge, but RBI has taken steps to tackle it: Shaktikanta Das MPNRC

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Central Bank Governor Shaktikanta Das has said that inflation has become the biggest challenge for many countries and the Reserve Bank of India is taking steps to deal with it effectively. In an interview, the RBI chief said that the bank was taking measures to rebalance liquidity through VRRR, expansion of our balance sheets and repo rates during an off cycle MPC meeting before discontinuing the pandemic-related liquidity infusion. was increased. To overcome rising inflation.

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“As far as challenges are concerned, inflation is certainly the biggest challenge facing most countries. Almost all market economies are facing rising inflation, a problem that worries governments and central banks around the world. Our current spurt in inflation is mainly due to global factors. “Since April, we are taking rate action to effectively tackle rising inflation,” Das said in an interview with The Times of India.

Quiet steps don’t make headlines, Shaktikanta Das said when asked why RBI didn’t hike repo rates before May. “In our April 2022 policy, we sent a clear message by prioritizing inflation over growth. We introduced the fixed deposit facility at a rate that was 40 basis points higher than the reverse repo rate. As a result, the overnight call rate – which is the operational target of monetary policy – increased simultaneously,” he said.

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“The idea behind these steps was to draw liquidity out of the system in a very gradual and systematic manner. Unless you remove excess liquidity, overnight call rates will not respond to rate hikes and remain low. So, you have to deal with the problem of excess liquidity first,” the RBI governor said in the interview.

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Shaktikanta Das also said that India’s retail inflation will remain above 6 per cent till December and then come down. “We are well on track to ease inflation and inflation expectations. By December, CPI inflation is expected to remain above the upper tolerance level; Thereafter, as per our current estimates, it is expected to go down by 6 per cent. There will be inflationary pressure, and only in the fourth quarter, we have forecast it to go below 6 per cent.” He added that inflation has now broadened and this is the issue that the RBI is now addressing through its actions. .

After touching an almost eight-year high of 7.79 per cent in April, CPI inflation cooled to 7.04 in May. Cooking oil prices for various brans have also become cheaper by Rs 20, after the RBI’s second repo rate hike in June and the government’s cut in import duty, which may help bring down inflation rates further.

Shaktikanta Das said that the Indian economy is gaining traction and the revival of economic activity is now stable. “The revival of economic activity remains steady and is gaining traction. GDP has surpassed 2019-20 levels, and since April 2022, many of the high frequency indicators that we monitor are showing steady improvement. The economy is back on track again. In terms of business activities or investments, opportunities are more in pharma, technology and renewable energy etc,” he said.

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