In a recent address at the Kautilya Economic Conclave 2023, Reserve Bank Governor Shaktikanta Das emphasized the need for a proactive approach to maintain a disinflationary monetary policy. The key objective, he stressed, is to ensure a smooth and continuous decline in inflation, which had surged to 7.44 percent in July.

The Pursuit of Disinflationary Monetary Policy Governor Shaktikanta Das underlined the significance of actively pursuing a disinflationary monetary policy. This strategy is essential to sustain the ongoing decrease in inflation rates, which is crucial for economic stability.

The Symbiosis of Price Stability and Financial Stability He highlighted the symbiotic relationship between price stability and financial stability. It has been the unwavering mission of the Reserve Bank of India (RBI) to efficiently manage both aspects, recognizing their interdependence.

Decline in Inflation Rates Governor Das acknowledged the recent drop in retail inflation, which hit a three-month low of 5.02 percent annually in September. This decline can be attributed to reductions in vegetable and fuel prices, bringing inflation back within the RBI's comfort zone.

RBI's Endeavors in Managing Inflation In August, the Consumer Price Index (CPI)-based inflation stood at 6.83 percent, which decreased to 7.41 percent in September 2022. In July, inflation had reached its zenith at 7.44 percent. The RBI had responded by raising the repo rate by 250 basis points since May 2022 in a bid to control inflation. Nevertheless, the RBI opted for a rate hike hiatus in February of the current year.

Transmission of Monetary Policy Governor Das elaborated on the importance of successfully transmitting interest rate hikes and mentioned that the RBI has taken appropriate measures to achieve this. The expansion of digital payment systems has significantly expedited and enhanced the effectiveness of monetary policy transmission.

The Ongoing Challenge of Monetary Policy Governor Das acknowledged that managing monetary policy is an ever-present challenge that allows no room for complacency. The dynamic nature of the financial landscape requires continuous adaptation and vigilance.

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Global Economic Challenges Governor Das also touched upon the current global economic landscape, which faces a triad of challenges - unrelenting inflation, decelerating growth, and looming threats to financial stability. These challenges are further compounded by recurring and overlapping shocks.

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Strength of Indian Banks Addressing the domestic financial sector, Governor Das expressed confidence that Indian banks are well-equipped to maintain minimum capital requirements even during stressful situations.

India's Growth Potential Governor Das concluded by expressing optimism about India's role as the new engine of global growth. He projected a 6.5 percent GDP growth rate for India in the current fiscal year, ending in March 2024.

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Conclusion:Governor Shaktikanta Das' address underscores the critical role of monetary policy in maintaining a disinflationary stance. As India grapples with domestic and global economic challenges, the RBI remains committed to achieving price stability and financial stability. With its robust stance and strategies, India is poised to play a significant role in the global economy, buoyed by steady growth and prudent financial management.

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