Elections were not a priority in drawing up the monetary policy, Reserve Bank of India (RBI) governor Shaktianta Das said on December 21, as the country will see a number of states going to the polls in the months ahead and the big one—the Lok Sabha election—in 2024.
During a question and answer session on the sidelines of an event in Mumbai, the country’s top banker said the government and the Reserve Bank of India (RBI) had a “coordinated approach” in addressing the inflation challenge.
“One thing I can make clear (is) the fact of elections coming up is not a factor at all for monetary policy making…,” Das said, adding the policy was targeting inflation.
Asked whether the monetary policy committee’s job was getting tougher as the nation moves closer to elections, Das said what the panel would do would be decided closer to the MPC meeting.
“MPC will do whatever is in the best interest of the economy,” he said.
The MPC has hiked the repo rate, the rate at which the central bank lends short-term funds to banks, by over two percentage points since May to combat inflation.
Inflation, as measured by the retail prices, has remained over the central bank’s target of 6 percent for nearly a year.
The RBI would keep on fine-tuning its inflation forecasting model but the forecasts were based on many factors, he said.
“Now if the underlying conditions changed or do not happen the way we have estimated, then naturally the numbers will be different,” Das said.
What was important was getting the direction of inflation, and not the number, right, he said.
“So I think it is direction and speed… not just getting that number right because monetary policy is based on direction of inflation and the broad speed of inflation,” Das said.
India’s headline retail inflation rate fell to an 11-month low of 5.88 percent in November from 6.77 percent in the previous month, data released by the ministry of statistics and programme implementation on December 12 showed.
At 5.88 percent, the latest Consumer Price Index (CPI) inflation print was well below the consensus estimate. A Moneycontrol poll estimated that inflation would fall to 6.4 percent.
A lower inflation print in November followed a similar drop in October, allowing it to fall below the 6 percent upper bound of RBI’s 2-6 percent tolerance band for the first time in 2022.As for the medium-term target of 4 percent, CPI inflation has exceeded it for 38 months in a row. The fall in inflation will come as a huge relief to the RBI, which has been on a rate-hiking spree since May.