New Delhi: During the Kautilya Economic Conclave 2023, Reserve Bank Governor Shaktikanta Das emphasized the imperative need for maintaining an actively disinflationary monetary policy. This approach is essential to ensure the smooth continuation of the decline in inflation, which had surged to 7.44 percent in July but has since decreased.

In his address, Governor Das highlighted the mutual importance of price stability and financial stability. He stressed that the RBI has consistently strived to manage both these aspects efficiently.

The latest data shows that retail inflation dropped to a three-month low of 5.02 percent annually in September. This decline can be attributed to the moderation in prices of vegetables and fuel, bringing inflation back within the Reserve Bank's comfort range. In August, the Consumer Price Index (CPI)-based inflation stood at 6.83 percent, and in September 2022, it was at 7.41 percent. Notably, in July, it had reached a peak of 7.44 percent.

To combat inflation, the Reserve Bank had increased the key policy rate (repo) by 250 basis points since May 2022. However, the rate hike was put on hold in February of this year. Governor Das commented on this, saying, "We have maintained a pause on the policy rate. The 250 basis points rate hike is still working its way through the financial system. We have also refined our communication to ensure the successful transmission of interest rate increases."

Additionally, Governor Das highlighted the significant role of digital payments in expediting the transmission of monetary policy.

Nevertheless, Governor Das cautioned that the realm of monetary policy remains perpetually challenging, leaving no room for complacency.

In his speech, he also underscored the triad of challenges facing the global economy, including persistent inflation, slowing growth, and potential threats to financial stability. "First, there is no sign of a sustained moderation in inflation due to recurring and overlapping shocks. Second, growth is decelerating, compounded by new obstacles. And third, there are looming concerns about financial stability."

Regarding the domestic financial sector, Governor Das expressed confidence that Indian banks could meet minimum capital requirements even in stressful situations.

He concluded by expressing optimism about India's role as the new engine of global growth, projecting a GDP growth rate of 6.5 percent for the current fiscal year ending in March 2024.

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