RBI governor Das calls for balance in managing inflation to support economic growth

The Reserve Bank of India has warned that unchecked inflation could undermine India’s economic prospects, particularly for industry and exports. Speaking at a high-level policy conference of central banks from the Global South, held to mark the RBI's 90th anniversary on Thursday, Governor Shaktikanta Das emphasised the importance of balancing inflation control with economic growth.

RBI Governor Shaktikanta Das stressed the critical role of price stability in fostering economic growth, highlighting its impact on reducing uncertainty, encouraging savings and investments, and sustaining long-term growth.

Das underscored the dual objectives of fostering growth and maintaining price stability. “Growth is a fundamental necessity for countries (from the Global South), but it cannot be and should not be at the cost of price stability,” said Das.

Reflecting on India’s pandemic-era policy, Das noted the RBI’s focus on reviving growth while treating supply-side inflation as temporary. He credited the Flexible Inflation Targeting (FIT) framework for enabling a balance between inflation control and economic growth, particularly amid challenges like the COVID-19 pandemic and geopolitical disruptions following Russia’s invasion of Ukraine. To counter inflationary pressures from rising food and energy prices, the RBI responded with rate hikes and a withdrawal of monetary accommodation.

“These measures were not open-ended. In fact, most of them were time-bound and announced with pre-set terminal dates. As a result, their unwinding did not cause market disruption,” Das said.

In all of these measures, RBI’s stance has remained the same, Das said, with the focus on balancing inflation with growth.

Das highlighted the growing significance of India’s manufacturing sector in global trade, stressing the impact of inflation on this momentum. He pointed to the importance of fiscal-monetary coordination, citing India’s experience during the pandemic as a model for emerging economies. Close collaboration between the RBI and the government helped mitigate supply shocks, showcasing the benefits of unified economic strategies.

In addressing the broader needs of countries in the Global South for become better developed economies, Das called for investments in infrastructure, technology, and reforms while maintaining price stability. He also emphasised the evolving role of transparent central bank communication in managing market expectations and ensuring accountability.