RBI Guv says post-Covid, MPC's focus is on 2-6% CPI band, not the 4% target

NEW DELHI: Reserve Bank of India Governor Shaktikanta Das on Thursday said during the Covid pandemic, the central bank’s focus has primarily been on reviving growth and inflation targeting is not pivoted on the 4 per cent medium-term aim, but rather the 2-6 per cent band that the government has set for the Monetary Policy Committee.

In an interaction with Financial Times and Indian Express, Das said RBI shall return to the 4 per cent goal over time, but that time is not today.

The RBI boss reiterated that the current elevated inflation in India is driven primarily by supply-side factors and that inflation is expected to moderate in the coming months.


He stressed on issues such as high pump prices for petrol and diesel products and rising prices of pulses and edible oils. At the same time, he said the government had effectively tackled the last two factors.

He also said there was no tangible evidence yet that surplus liquidity conditions in the banking system and related factors such as the boom in equity markets were feeding into inflation.

While acknowledging that the second Covid wave had a severe impact on the economy, Das said high-frequency indicators such as two-wheeler sales, cement sales and E-way Bills suggest growth is reviving.

He said RBI’s projection of 9.5 per cent GDP growth for FY22 still holds, and that while the statistical effect of a low base would continue for some time, it would soon moderate.

According to him, the GDP growth of 20.1 per cent for Apr-Jun, while falling short of RBI’s own prediction of 21.4 per cent, was in line with the central bank’s expectations.

On a sequential basis, the RBI Governor expects GDP growth in Jul-Sep to be much better.

While flagging the uncertainties from a possible third wave of Covid-19 in India, Das said businesses have learnt to adapt to the realities of the pandemic.

On the government’s fiscal position, Das preferred not to comment at length but said the government has taken calibrated steps and that the central bank has been giving suggestions to the Centre.