Mumbai. Reserve Bank of India (RBI) Governor Shaktikanta Das said on Tuesday that low inflation is also beneficial for farmers. He said this amid fears of discontent among farmers due to the policy emphasis on controlling inflation. Das said at a program of Bombay Chamber of Commerce and Industry here that policy makers always grapple with the dilemma of balancing several objectives. He said that keeping the prices of agricultural produce low for consumers and increasing the income of farmers is one such puzzle.
He said, “We should also remember that the farmer is also a consumer. Apart from wheat, he buys many other things for his daily life. Reducing inflation is also in the interest of farmers.” These comments, coming a few weeks after the election results, are important because the ruling BJP has suffered a setback due to the anger of farmers in some states like Maharashtra.
Interest rate is not hampering growth, focus will remain on controlling inflation: Das
Reserve Bank of India (RBI) Governor Shaktikanta Das said on Tuesday that high interest rates are not hampering economic growth. He also made it clear that the focus of monetary policy will remain on reducing inflation. Addressing a program of the industry body Bombay Chamber of Commerce and Industry, Das said that the country is on the threshold of a ‘major structural change’ in the level of economic growth. The country is moving on a path where eight percent real GDP growth can be maintained on an annual basis.
He said, “Generally, if the growth rate is good and it is maintained, then it is a clear indication that your monetary policy and your interest rates are not becoming an obstacle in the path of growth.” Amid the ongoing debate on growth being affected due to high interest rates, Das said that all such concerns are baseless and the pace of growth is intact. He said that the RBI’s ‘Nowcasting Team’ is estimating the GDP (gross domestic product) growth rate for the June quarter to be 7.4 percent on the basis of dynamic elements. This is more than the central bank’s own estimate of 7.3 percent.
According to Das, he is confident that the economy will grow at the RBI’s estimated rate of 7.2 percent in the financial year 2024-25.
He said, “A good growth rate scenario clearly gives us scope to focus on inflation.” Das gave the example of chess to focus on reducing inflation in the coming times. He made it clear that one wrong move can derail us from the path.
He said that it is necessary to pay close attention to inflation because even a single adverse weather event can take inflation above five percent. The RBI Governor said that due to the steps taken under the monetary policy, inflation has come down from a high of 7.8 percent in 2022 to 4.7 percent at present. He said that a low level of price rise can ensure sustainable growth.
Das said, “High inflation affects the competitiveness of the economy, making the economy an unfavorable destination for both domestic and foreign investment. Most importantly, high inflation will mean reducing the purchasing power of people, especially the poor.” He said that in the last three years, government expenditure has been driving growth. Now there is clear evidence that private capital expenditure is increasing and the most interest is being seen in infrastructure-related sectors like cement and steel.
Das also said that the economy will move forward only when there is growth in various sectors and he talked about focusing on all sectors to accelerate growth. He said this amid some experts including former RBI Governor Raghuram Rajan calling for India to focus on the service sector for growth. The RBI Governor said that a large economy like India cannot depend on either manufacturing or service to achieve its growth ambitions.