India's interest-rate stance now depends on data: RBI | 2019-07-23

India's interest-rate stance now depends on data: RBI

23 July, 2019 12:00 AM printer

NEW DEHLI: The Reserve Bank of India's future policy action will depend on incoming economic data after a series of moves this year that Governor Shaktikanta Das says are equivalent to 100 basis points of interest-rate cuts.

In one of his first interviews with media since taking office seven months ago, Mr Das said he sees signs of recovery in growth and that the central bank's switch to an accommodative stance in June in itself amounts to a 25 basis-point cut. The RBI cut interest rates by a cumulative 75 basis points since February, report agencies.

"Effectively, the rate cut has been 100 basis points if you take into account the change in stance," Mr Das said ahead of the next Monetary Policy Committee meeting that begins Aug 5. "The accommodative stance will depend on incoming data. How inflation numbers look how the growth numbers look. Primarily how inflation looks."

The RBI has been the most aggressive central bank in Asia this year to ease policy to support growth amid low inflation. A gloomy global outlook fanned by trade tensions has since prompted policy makers from Australia to South Korea to join the dovish camp.

"Parallel to that we have also ensured surplus liquidity in the system," Mr Das noted.

The need now is to ensure a revival in domestic demand, Mr Das said, adding that an improving monsoon, lower oil prices and an easing of a domestic credit crunch are positive.

"The signs are looking good," he said.

Waning consumption dragged gross domestic product growth to a five-year low of 5.8 per cent in the first three months of 2019, meaning India lost its title as the world's fastest-growing major economy. That data was followed by the RBI in June lowering its growth forecast for the current fiscal year to 7 per cent from April's projection of 7.2 per cent.

"I would not like to specify how long it will last," Mr Das said, referring to the current slowdown. "India is today in a far better place than most of the major economies and India has certain inherent resilience and the signs are looking good."

As for prices, Mr Das said a decline in core inflation can be seen as a positive development on the one hand, but also as reflective of a slowdown in demand. "Therefore I don't want to make a qualitative judgement on good or bad. Based on hard numbers, we will have to take a call," he said.