Shaktikanta Das, governor of the Reserve Bank of India (RBI) has said India’s growth momentum continues to be robust and the official data for GDP growth in the second quarter (Q2) will surprise on the upside. Das, who was speaking at the annual BFSI Insight Summit organised by Business Standard in Mumbai, said inflation is central bank’s first priority for the RBI at the moment.
According to the PTI, the governor said, “… looking at the momentum of economic activity, looking at a few early data points that have come in a few early indicators, I can say that the second quarter GDP number as and when it is released at the end of November, in all probability will surprise everyone on the upside.”
Das said the central bank forecasts the Q2 real GDP growth to come at 6.4 per cent, while underlying geopolitical uncertainties are the biggest risk to global growth at present. He maintained India is economically better placed to handle it as compared to other countries. According to Das, rates in advanced countries and other global factors are taken into consideration while formulating the monetary policy, but was quick to add that eventually the monetary policy is driven by domestic factors of inflation and growth, as the PTI reported.
“Our monetary policy is not influenced by what is the differential in bond yields (between India and the US) or if currency is depreciating,” Das said. During his speech, the governor said he initially admitted that this is a double-edged sword with positives and negatives when asked about the country’s inclusion in the J P Morgan global bond indices; but sought to allay fears saying any large volatilities in the financial markets are unlikely.
He said the move can get an additional $25 billion into the country as estimated by analysts, but it can potentially lead to an outflow as passive investors’ money can move out as the country weightage moves. “We can handle large-scale inflows (and) large-scale outflows. So, therefore, I don’t think we will see that kind of volatility. I think the RBI has the capacity to deal with it effectively,” the governor added.