MUMBAI: Governor Shaktikanta Das refuted the policy step criticism on Friday, denying that the RBI was behind the curve, saying that focusing on inflation management earlier would have had "disastrous" consequences for the economy. "Tolerance for rising inflation was a necessity, and we stand by our decision," Das said at a Financial Express event in New York.
He added that the central bank was in tune with the needs of the economy, and that the RBI's statutes clearly state that inflation must be managed while keeping the growth scenario in mind.

In the face of the epidemic, the RBI changed its priority to growth and provided easy money. Despite this, the economy shrank by 6.6 percent in FY21, Das said.  He made it plain that it could not have turned its priority to combat inflation 3-4 months earlier.

The RBI chose to refocus its focus on inflation control in March after determining that economic activity had risen above pre-pandemic levels, Das said, adding that it could not give a significant rate hike right away.  "I would not agree with any notion or description that the RBI has slipped behind the curve; just imagine what would have happened to growth if we had started raising rates earlier."

Das made it clear that the 4.5 percent inflation forecast for FY23 in February 2022 was not optimistic, saying that the calculations were based on the assumption that crude would be at USD 80 per barrel, but that the developments following Russia's invasion of Ukraine just days after the central bank made this public have changed the scenario.
On liquidity, he stated that all of the RBI's actions during the pandemic had a time limit, but that variables beyond the central bank's control, including several waves of illnesses and the war, have made the exit from easy liquidity policies take longer.

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