RBI not behind curve: Das

Mumbai, June 17

Governor Shaktikanta Das on Friday refuted criticism of the RBI being behind the curve in its policies, making it clear that the consequences of focusing on the 4% inflation target would have been ‘disastrous’ for the pandemic-hit economy.

STAND BY OUR DECISION

Tolerance of a higher inflation during the pandemic was a necessity, and we still stand by our decision. —Shaktikanta Das, RBI Governor

In comments that came two days after former Chief Economic Adviser Arvind Subramanian co-authored an article blaming the RBI for acting late on inflation and being behind the curve, Das said the central bank acted as per the evolving economic developments and also gave out a timeline of its actions to explain the shift.

“…tolerance of a higher inflation during the pandemic was a necessity, and we still stand by our decision,” Das said speaking at an event here today.

He said the RBI switched into ultra-accommodation as soon as the country went into the lockdown and shifted focus to inflation two years later in April 2022, when it saw the GDP had gone beyond the pre-pandemic level.

Despite its accommodative policies, the economy contracted by 6.6% in FY21 and recovered to barely above the pre-pandemic levels in FY22, he said, stressing that a shift in policy management to focus on inflation even 3-4 months before April 2022 was not apt.

“I feel we are very much in line with the requirements of our time, the RBI has acted proactively and I would not agree with any perception or any sort of description that the RBI has fallen behind the curve,” Das said.

Subramanian’s article blamed the RBI for being behind the curve, pointing out that the 4% inflation target has not been met since October 2019 and in 18 of the 32 months since then, the headline consumer price inflation has breached even the RBI’s ceiling of 6%. It also raised question marks over inflation forecasting.