Growth can’t come at expense of inflation, RBI’s Das says

While growth is essential for the Global South, it cannot come at the expense of price stability, Reserve Bank of India (RBI) governor Shaktikanta Das said on Thursday.

Das highlighted the role of price stability in helping sustainable growth, while addressing a high-level policy conference of central banks from the Global South in Mumbai.

Price stability reduces uncertainty, encourages savings and investments, and ultimately boosts the economy’s potential growth rate, he said, adding: “In the long run, price stability enables sustained high growth and shields the poor from the disproportionate burden of high inflation.”

Das also stressed the need for higher investment in physical and social infrastructure, technological innovation, and institutional reforms to drive growth.

“These require supportive public policies, including monetary measures, while maintaining a balance with inflation,” the RBI governor said.

Das’ comments come after finance minister Nirmala Sitharaman and commerce minister Piyush Goyal this month sought a reduction in interest rates.

Earlier this week, Sitharaman called for a reduction in interest rates, calling the current borrowing costs as “very stressful” for industries that are looking to expand capacities.

“What is important is that when you look at our growth requirements, and you have so many different voices coming out and saying the cost of borrowing is very stressful,” she said, continuing, “…and at a time when we want industries to ramp up and move (to) building capacities, interest rates will have to be far more affordable.”

Before her, Goyal had said that the Reserve Bank should lower interest rates. “I certainly believe they (RBI) should cut interest rates. Growth needs a further impetus,” Goyal had said at an event on 14 November in Mumbai.

Das, while responding to Goyal’s remarks, said: “The next monetary policy is coming up in the first week of December. I would like to reserve my comments for that. Thank you.”

The central bank has maintained the repo rate at 6.50% since February 2023 for 10 monetary policy reviews in a row.