The Reserve Bank of India’s (RBI) Governor Shaktikanta Das on Saturday said that India’s overall macroeconomic fundamentals remain resilient. He also added that the central bank estimates India to grow by 7 per cent this year.
“Our estimate is that India will this year grow by about 7 per cent. IMF has projected that India will grow by about 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 entire European Union is today at the brink of recession.. the United States is holding stable, and other countries also witnessing growth has slowed down. However, so far as India is concerned, macroeconomic fundamentals, the financial sector stability, all these aspects will remain resilient.”
On inflation, Shaktikanta Das said that it remains a matter of concern for the central bank. He said that the Inflation number for October is expected to be lower than 7 per cent. Both RBI and the government are dealing with the challenge of inflation effectively, he added.
“There’s a reason why the inflation target has been kept at 4 per cent. The internal committee of RBI did a detailed analysis and found that 4 per cent inflation target with a price band of plus-minus 2 per cent. RBI research at that point of time found, and even now it holds good, that inflation for India would be detrimental to growth,” Das said.
On the question about the letter to the government and its content, Das said that the law requires that when for three consecutive quarters, if the inflation remains above 6 per cent, it will be treated as a failure of monetary policy, and the RBI is required to write a letter to the government. In that letter, RBI is expected to inform the government about the reason behind its failures, the steps it proposes to undertake, and what is the timeframe within which it expects inflation to come back to the target level.