Overarching policy focus and priority now is supporting growth, says RBI Governor

Mumbai: Reserve Bank Governor Shaktikanta Das on Wednesday defended the central bank's more-than-anticipated dovish stance wherein the MPC unanimously voted to continue with an accommodative policy, saying "our overarching policy focus and priority now is supporting growth" amid the threat of a third wave of Covid and the legroom a cooling inflation print offers.

The comments came after the RBI's Monetary Policy Committee left the key policy rates unchanged for the ninth time in a row. Addressing reporters at the customary post-policy presser, Das elaborated, "Our overarching priority and focus now is supporting growth and reviving growth, but maintaining price stability is also our concern along with financial stability as we are an inflation-targeting central bank."

While activities of various sectors have crossed pre-pandemic levels, some segments like private consumption and investment are still lagging, Das said.

He admitted that the economy is facing several challenges in terms of market volatility, rising crude oil and commodity prices and supply side disruptions like container and chips shortages. On whether the RBI is risking losing its inflation fight as it continues to provide liquidity to an already fund-flushed market, Das said looking at the surging inflation in various major advanced economies amid the Omicron threat, "being cautious was the best option left for us."

On why the RBI continues to keep the standing deposit facility (SDF) to manage liquidity while using the variable reverse repo repurchases or VRRRs, deputy governor and head of the monetary policy department Michael D Patra said SDF will be used when needed as RBI has several tools in its arsenal.

So we chose VRRRs as that is more market friendly than SDF, he added. On whether the RBI has been ultra-dovish, Das and Patra said it was not correct to compare India's inflation dynamics with those of advanced countries. Das added that "we are fully mindful of and aware and conscious of the complexities of our job... we are an inflation-targeting central bank and we are fully mindful of and cognizant of how important it is for us to maintain price stability along with financial stability, and also supporting growth."