“The last (May) CPI print was 4.7 per cent and the June inflation is expected to be out tomorrow (July 12). As per various surveys, it (June CPI inflation) is likely to be close to 5 per cent. So, when we are at 5 per cent and our target is 4 per cent, I would feel it is too premature to talk about interest rate cuts,” Das said when asked about his guidance on repo rate cuts.

He said the overall economic environment, globally as well as in India, is very uncertain to talk about interest rate cuts.
“I would not like to give any kind of forward guidance, which would lead the market players and the stakeholders to board the wrong train,” he emphasised.

The RBI Governor’s statement comes days ahead of the monetary policy meeting, wherein it is expected that the six-member Monetary Policy Committee (MPC) may leave the repo rate – the key policy rate unchanged at 6.5 per cent. The MPC is scheduled to meet from August 6 to 8.

In the June monetary policy meeting, the rate-setting panel kept the repo rate unchanged at 6.5 per cent for the eighth consecutive time. In the policy, two external MPC members – Ashima Goyal and Jayanth R Varma – voted for reducing the repo rate by 25 basis points and changing the stance from withdrawal of accommodation to neutral. When asked if the perceived froth in the stock market is holding the RBI from cutting the repo rate, Das said the central bank monitors all aspects of the economy, including the stock markets, more from the point of view of financial stability and the kind of spill over it will cause to the economy. He said the RBI’s rate action or monetary policy decision is governed by inflation and growth trajectory.

Das further said the RBI is very closely watching the banking sector and wherever it sees a potential problem, it takes action. He said the RBI increased the risk weights last year on banks’ exposure to consumer credit, credit card receivables and non-banking finance companies (NBFCs), to avoid any stress in the banking sector.

To a specific query on if there was a fear that bank money could be fuelling the stock market rally, and so there was a case for higher risk weights or to keep interest rates on watch, he said, “So far as bank money giving some boost to the stock market is concerned, the exposure limit of banks to the stock market, individual borrowings from NBFCs, which were very high earlier for participating in initial public offering (IPOs) and follow-on public offering (FPOs)…even there we have put a limit of Rs 1 crore. It was all done some two years ago.” He said banks do have their own system of monitoring the end use of funds and only some amount of unsecured credit may go into the stock market. However, for unsecured credit, the RBI has mandated additional risk weights, which has already moderated the overall growth in the segment.

When asked about the factors which could lead to the change in monetary policy stance of withdrawal of accommodation, Das said, given that inflation is above the 4 per cent target, it would be early to talk about the change of stance.

“Unless you are close to 4 per cent, the question of changing the stance, I think, would be premature. When we move towards 4 per cent (inflation target) on a kind of a sustained and durable basis, only at that point we may get the confidence to have a relook (on policy stance),” the Governor said.

On growth, Das said in the last three years, the GDP growth has averaged at about 8.3 per cent, and for the current year the economy is expected to expand by 7.2 per cent. Das said the momentum of growth witnessed in the last quarter (January-March) of FY2024 was very strong, and it continues to be strong in Q1 FY2025.

“Given this, I think 7.2 per cent (GDP growth), which we have given (projected) at this point in time, looks very much achievable,” Das said.

The Governor said agriculture is expected to perform well in the current year due to the good monsoon season. Among industries, manufacturing as well as services sectors have been doing very well.

Das said urban consumption has been strong for quite some time and is remaining stable. Rural consumption, which was lagging, has picked up. Given the fact that there is an expectation of a good monsoon, the rural purchasing power will also go up.
“If you put all these things together, I think what we are looking at is that India is on a trajectory of higher growth. There is a structural momentum to our growth drivers and we are moving towards 8 per cent growth,” he said.

On potential growth rate, Das said it is the direction of growth which is important and not the exact growth number.