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Rbi’s governor explains why he went from worrying about growth to worrying about inflation


Another interest rate hike is a “no-brainer”, according to Reserve Bank of India (RBI) Governor Shaktikanta Das. In an interview with CNBC-TV18, Das said India’s central bank was looking to reduce liquidity in the economy to rein in inflation, which hit an eight-year high in April 2022.

Inflation is currently the main concern of the RBI, and Das explained the situation by giving an example of what is happening across the world.

“Today, interest rates in almost all countries are negative, with the exception of Russia and Brazil. The inflation target for advanced economies is around 2%. Except for Japan and one other country, all advanced economies have inflation above 7%,” Das said.

Rbi’s governor explains why he went from worrying about growth to worrying about inflation

The World Bank has released its food price index, which clearly indicates that food prices will remain high.

Rbi’s governor explains why he went from worrying about growth to worrying about inflation

“We will be heading towards positive real rates, but it is impossible to predict how soon due to the evolution of the situation,” the governor said.

There is also a silver lining for the economy, as private investment is showing signs of improvement.

“My feeling is that the government will maintain the budget deficit. The export sector continues to be very strong, imports have also picked up. An increase in imports shows that domestic demand is recovering, and we have high imports despite the increase prices,” the RBI said. governor.

Eye on the Rupee

The governor also assured that the central bank is closely monitoring the foreign exchange market.

“Our stated position is to prevent excessive volatility of the Rupee. We have no specific target, but we will avoid excessive volatility. The Rupee is determined by the market, but we will not allow runaway depreciation of the rupee,” he said.

CAD image

When asked if the balance of payments would swell for the government due to rising inflation, Das said he did not expect a big jump in the current account deficit (CAD). “We are comfortably placed to finance the current account deficit,” he said.

Additionally, the monsoon forecast looks good, which should help agriculture, Das said.

(Edited by : Abhishek Jha)

First post: STI


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