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Informist, Friday, Oct. 18, 2024

 

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--Das: India's growth intact, inflation moderating
--Das: Careful on monitoring growth, inflation outlook
--Das: Expected Sept CPI inflation to be high
--Das: Expect inflation to moderate Nov, Dec
--Das: Maintain close vigil on credit market
--Das: Agree this is India's moment
--Das: Investment and credit cos showing good progress
--Das: India needs multi-sectoral growth to become developed economy
--Das: India needs focus on rural infra projects, large infra projects
--Das: India needs to tap domestic resources to become developed
--Das: To address key issues in opening up markets for foreign investors
--Das: India tapping local, foreign resources to build infra
--Das: Need more institutional investors in corporate bond market
--Das: Foreign investors using only 15% of invest cap in corporate bonds
--Das: Focusing on creating robust secondary corporate bond market
--Das: Private credit posing certain risks at global level
--Das: Private credit in India does not pose systemic risk right now
--Das: Saw, addressed risk building up in alternate invest funds
--Das: Lots of distance for private credit to cover in India
--Das: Monetary policy well-aligned with market expectation
--Das: Rate cut at this stage will be pre-mature, risky
--Das: India monetary policy not behind the curve
--Das: On rate cuts: Don't want to join party, will wait and watch
--Das: On rate cuts: Want to "join the party" on durable basis
--Das: Policy will depend on incoming data
--Das: We watch other systemic central banks, such as US Fed, are doing
--Das: RBI's decision primarily driven by domestic developments
--Das: Geo-econ fragmentation becoming a problem globally
--Das: Geo-econ fragmentation impediment for global growth
--Das: Unilateral trade curbs an impediment to global growth
--Das: Maintaining financial stability in last 6 years biggest achievement
--Das: India economy, financial sector much stronger than before recent crises
 

 

NEW DELHI – Reserve Bank of India Governor Shaktikanta Das has seemingly looked to stub out expectations of an interest rate cut in December, saying that such a move at the current juncture would be "premature". "Growth is holding on, growth is steady, growth is resilient. Inflation is moderating with certain risks about which we have to be very vigilant. So therefore, rate cut at this stage will be very premature and can be very, very risky," Das said on Friday in Mumbai at an event hosted by Bloomberg.

 

"When your inflation is 5.5% and next print is also expected to be high, you can't be cutting rates at that point, more so if your growth is also doing well," he added.

 

At its last meeting, the RBI's Monetary Policy Committee changed its stance to neutral from withdrawal of accommodation, sparking hopes of a first repo rate cut in four-and-a-half years in December. However, data released this week showed headline retail inflation had surged to a nine-month high of 5.49% in September, well above economists' forecasts, from 3.65% in August.

 

To be sure, the RBI had expected inflation to be sharply higher last month. "We expected September inflation to be high... and we expect a higher number in October also. But thereafter, in November and December, we expect inflation to moderate," Das said Friday.

 

The big jump in inflation last month along with expectations of a near-6% figure in October--data for which will be released on Nov. 12--has led to some economists lowering the probability of a December rate cut. Das, too, seemed to suggest the RBI is in no hurry to join a global "rate cut party".

 

"We will not miss the party. In any case, we don't want to join any party," the governor said in response to a question. "We would rather like to wait and watch. And if we decide to join the party, we would like to join it on a durable basis...when we have confidence that inflation figure is durably aligned with our target of 4%."

 

As per the RBI's latest inflation forecast, CPI inflation is seen rising to 4.8% in Oct-Dec, up from 4.2% in Jul-Sept, before moderating to 4.2% in the last quarter of 2024-25 (Apr-Mar).

 

"I would not like to give any guess in advance that we are going to cut or anything... We have to wait for the incoming number--and please mark my words very carefully: we have to wait for the incoming data and more than that, we are more dependent on what kind of outlook we have ahead of us...because policy has to be forward looking," Das said.

 

His comments come after Deputy Governor Michael Patra on Monday said that inflation is seen "aligning with the target on a durable basis in 2025-26". The central bank, which so far had not said when inflation would align with its medium-term target of 4%, projects inflation at 4.1%, which would be the lowest since FY19.

 

Commenting more broadly on the Indian economy, the RBI governor Friday said the country needs multi-sectoral growth to become a developed economy, with a focus on rural infrastructure. To finance the infrastructure needs of the country, India needs to tap domestic as well as foreign sources. In particular, the local corporate bond market requires more participation by institutional investors, with plenty of space available for foreign investors too. On private credit, Das said while it posed certain risks on a global level, it was not an issue for India currently given that it has a "lot of distance to cover" and is well regulated by the RBI.  End

 

Reported by Siddharth Upasani

Edited by Ashish Shirke

 

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