Das for focus on inflation-growth balance

PTI

Mumbai, Updated At : 09:14 AM Dec 21, 2024 IST

Shaktikanta Das, former Governor of the Reserve Bank of India (RBI), emphasised the need to restore the balance between inflation and growth, citing it as the primary policy priority during the December meeting of the RBI’s Monetary Policy Committee (MPC). Das, along with three other members, voted to keep the repo rate unchanged at 6.25 per cent, while two external members favoured a 25 basis point reduction.

The RBI’s decision to maintain the repo rate came amid a slowing economy, with India’s GDP growing at just 5.4 per cent in the July-September quarter, the lowest in seven quarters, and inflation rising. The RBI also reduced the cash reserve ratio (CRR) to support economic growth while managing inflation.

In the minutes released on Friday, Das stated, “The fundamental requirement now is to bring down inflation and align it with the target.” He added that the progress in disinflation must be preserved while monitoring both inflation and growth closely. This was Das’s last meeting as RBI Governor, following his extended six-year tenure. Sanjay Malhotra will take over as RBI Governor and chair the next MPC meeting in February.

RBI Executive Director Rajiv Ranjan and Deputy Governor Michael Patra, along with Das, supported the status quo, emphasising a cautious approach to ensure economic stability. Patra highlighted that the policy stance was open to supporting growth, but only when inflation showed durable signs of easing.

“Accordingly, I vote to maintain status quo on the policy rate and persevere with a neutral stance in this meeting,” he said.

External members Nagesh Kumar and Ram Singh, were both in favour of a 25 basis point reduction in repo rate.

As per the minutes, Nagesh Kumar said he believes that a rate cut would help reviving economic growth without worsening the inflationary situation, which may soften with seasonal correction in prices.

Ram Singh said a rate cut will reduce costs of doing business and increase the opportunity cost of holding on to cash for firms and companies. The next meeting is between February 5-7, 2025.