Reserve Bank of India Governor Shaktikanta Das says RBI saw signs of the Indian economy slowing earlier on and had announced repeated interest rate cuts throughout 2019. As per a Mint report, he said that there is probably room for further cut in the rates, however, the central bank is moving cautiously keeping an eye on the inflation.
The Governor was speaking at the 13th Mint Annual Banking Conclave in Mumbai.
He said in his address that when the year started, there were very little clues that the economy would slow down to a 11-year low of 5%. It came as a surprise to most. It is here that he mentioned that RBI pre-empted the situation and maybe soft-landed the slowdown pangs. RBI had cut the benchmark interest rate by 135 basis points between February and October 2019.
The Governor referred to the last Monetary Policy Committee (MPC) meeting and said the need for more structural reforms were discussed at that meeting.
On the inflation front, the RBI feels comfortable as long as the inflation (CPI) stays within the 2-6% range. The latest figure for retail inflation in January 2020 has been 7.9% far higher for RBIâ€™s comfort.
Elaborating further on the deliberations at the MPC meeting Governor Das said he was very clear that only growth in the economy can bring in more stability and the monetary policy recommendations made this time have stressed on this fact.
The RBI Governor then expressed his displeasure over the farm loan waiver by the state governments one after the other. He said such waivers were not in the long-term interests of the farming community. For one, it encourages a mentality where farmers donâ€™t feel compelled to pay back loans they have availed. This is bad for any banking system. Secondly, the state governments donâ€™t reimburse the banks promptly once the loans are waived off.