Reserve Bank of India (RBI) Governor Shaktikanta Das said on Saturday that India’s overall macroeconomic fundamentals remained resilient. He also added that the central bank estimates that India should grow by 7% this year.
“Our estimate is that India will grow this year by around 7%. The IMF has forecast that India will grow by around 6.8% in the current year. And that puts India among the fastest growing major economies in the world,” the RBI Governor said at the Hindustan Times leadership summit in New Delhi.
Das said: “The whole of the European Union is now on the brink of recession…the United States remains stable and other countries whose growth has also slowed. However, when it comes to India, the macroeconomic fundamentals, the stability of the financial sector, all of these aspects will remain resilient.
Regarding inflation, Shaktikanta Das said it remained a concern for the central bank. He said the inflation figure for October should be below 7%. RBI and the government are effectively dealing with the challenge of inflation, he added.
“There is a reason the inflation target has been kept at 4%. The internal committee of RBI did a detailed analysis and found that the inflation target of 4 percent with a price range of plus or minus 2 percent. RBI’s research at that time found, and even now is valid, that inflation in India would be detrimental to growth,” Das said.
On the issue of the letter to the government and its contents, Das said that the law requires that for three consecutive quarters, if inflation remains above 6%, it be treated as a failure of monetary policy, and the RBI is obliged to write a letter to the government. In this letter, RBI is expected to inform the government of the reason for its failures, the measures it proposes to undertake and the time frame in which it expects inflation to return to the target level.
