Arjuna looks at inflation and growth, not elections; 2024 polls not an issue for MPC, says RBI Governor Das

The Indian financial sector remains resilient and much better placed, said RBI Governor Shaktikanta Das at a BFSI event on Wednesday. The global economy has been under pressure for the last three years due to Covid19 pandemic and the Russia-Ukraine war. Despite global turmoil, the Indian economy has performed better than its peers. The Reserve Bank of India, after struggling for months, has finally achieved the target of bringing inflation down into the tolerance band of 2-6%.  

The impact of elections on the RBI policy-making process has been on the minds of investors but Das explained that monetary policy works independently and just focuses on bringing inflation in the required tolerance band. “That elections are coming in 2024 is not a consideration for monetary policy. Govt also want to bring down inflation. Arjuna only looks at inflation and growth, not at elections. The coming election in 2024 is not an issue for monetary policy,” said RBI Governor.

Indian investors and economists take clues from the US Federal Reserve to prepare forecasts but RBI Governor explained that it is just one of the factors and domestic data guides the RBI policy. “What US Fed does is important for everyone as a large part of transactions are dollar-denominated. But for us, it is one of the factors. We are guided by domestic inflation and growth dynamics. We continually fine-tune our models of inflation forecasting. External factors will have an impact on the domestic growth scenario,” said Governor Das.

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Talking about the credit and deposit growth, Shaktikanta Das said “Credit growth, which is, 17.5% reflects the underlying fundamental of the economy. This is on a low base of the previous two years. It is a reflection of the pent-up demand of the last two years. Just as credit growth looks high on a low base, deposit growth which looks low is on a higher base.”

As India assumes the G20 presidency, RBI Governor Das said “G20 presidency is a great opportunity for India. The biggest task for G20 is to restore the trust and efficacy of multilateralism.”