New Delhi:
High inflation is akin to tax on everyone, RBI Governor Sanjay Malhotra told NDTV on Friday, adding that the central bank is steadfast in its commitment to meet the goal of price stability.
"We are steadfast in our commitment to meet our goal of price stability. Price stability is very important for them (people) because it is the real rates which are important. If there is high inflation, then it's like a tax on everyone. So, it's very important that we meet our objective of price stability, our target of 4% with a band of, you know, plus-minus 2%," the RBI Governor said at NDTV World Summit in Delhi.
Rising inflation and signs of price pressures spilling over into a range of goods weighed on the RBI's six-member Monetary Policy Committee (MPC), which unanimously voted to hike the repo rate by 25 basis points this month, according to the minutes of the panel's meeting released on Wednesday.
The RBI decided to raise the benchmark lending rate for the first time in nearly four years. RBI Governor Sanjay Malhotra said it was appropriate to shift the monetary stance to calibrated tightening.
"While we are taking this action of increasing the policy repo rate, even though it means higher interest rates, it means higher cost of credit for everyone but it is with the objective of curtailing inflation which is in everyone's interest," the RBI Governor told NDTV.
Consumer price index (CPI) based retail inflation rose sharply to 5.54 per cent in September on the back of high onion and other food prices, remaining just within the RBI's tolerance band.
The government has mandated the RBI to keep inflation at 4 per cent, with a 2 per cent margin on either side.
"Inflation is elevated but it still is not out of the tolerance band and again it is because of the policy framework that was put in place in 2016 when we got inflation targeting as the mandate for the RBI," he said.
The RBI Governor said the higher inflation is because of supply side reasons, primarily arising out of food and fuel.
Despite these inflation concerns, India's economic growth has remained resilient. The country recorded GDP growth of 7.8 per cent in the first quarter of FY27, supported by strong private consumption, a pickup in exports and continued momentum in the services sector.
"Growth has been holding up very well, 7.8% for Q1. It is not because of consumption, investment has seen 12% growth. Exports too have seen double digit growth. The growth in Q1 was quite broad based and even this quarter the high frequency indicators - whether one looks at cement, steel, credit growth, taxes growth, sales of automobiles - all of that is actually holding up. It is because of the reforms and policy measures and the frameworks that we have put in place," he said.
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