There is still scope for monetary rate cuts, but this tool is needed at the right time: RBI Governor

According to Reserve Bank of India (RBI) Governor Shaktikanta Das, there is still room for a reduction in monetary rates. However, he emphasized that this instrument needs to be used consciously to accelerate economic growth. It is noteworthy that the pace of economic growth of the country has been dramatically affected by the Covid-19 epidemic. The details of the meeting of the Reserve Bank’s monetary policy review were shared on Thursday, in which the RBI Governor’s stance is mentioned. In the MPC meeting held under the chairmanship of Das earlier this month, it was decided to keep the repo rate unchanged at four per cent.  

However, the MPC kept its stance liberal. This indicates scope for rate cuts if needed to support the economy affected by the Kovid-19 epidemic in future.

According to the details of the meeting, Das had also said that it would be better to wait at the moment to reach any precise estimate of economic growth and inflation. Das said, “It would be prudent to wait for a strong assessment of the outlook for growth and inflation, as the economy is slowly opening up, supply bottlenecks are reducing, and the pattern of providing price information is stabilizing.” 

The RBI governor said that there is a possibility of delay in reviving investment demand early due to inadequate utilization of capacity amid weak domestic and external demand. According to Das, pressure on the Whole Food and Consumer Price Index (CPI), excluding food and fuel, is a matter of grave concern in the event of a sharp decline in the pace of economic growth.

The Reserve Bank Governor said, “As I have repeatedly been saying since October 2019, monetary policy has been designed to strengthen the economic reform process.” While there is scope to reduce rates under monetary policy right now, in this situation, it is crucial to preserve this instrument and use it judiciously when needed. ”