RBI Gov Das stresses on price stability as key to economic planning and growth
R
eserve Bank of India (RBI) Governor Shaktikanta Das on Thursday underscored the crucial role of price stability as the foundation for sustained economic growth during his address at the "High-Level Policy Conference of Central Banks from the Global South."
"Price stability is as important as growth in enabling economic agents to plan ahead, reducing uncertainty and the inflation risk premium, and encouraging savings and investment, all of which boost the potential growth rate of the economy," Governor Das said, emphasising the need for a balanced approach.
He further stated that stable inflation, or price stability, is in the best interest of both the people and the economy.
"Price stability serves as the bedrock for sustained growth. It enhances the purchasing power of individuals and provides a stable environment for investment," he added.
Das highlighted the delicate balancing act required to manage inflation and growth, a task complicated in recent years by overlapping global crises, including the COVID-19 pandemic, geopolitical tensions, supply chain disruptions, and climate change.
Reflecting on India's journey through turbulent economic times, Das credited the Flexible Inflation Targeting (FIT) framework for its instrumental role in addressing challenges posed by the pandemic and the Russia-Ukraine war.
The framework allows for inflation targeting while accommodating growth objectives, ensuring that monetary policy remains forward-looking and adaptive.
Das recounted how the RBI prioritised growth during the pandemic by tolerating transitory inflation spikes caused by supply chain disruptions. "Our assessment that these spikes were temporary proved correct as inflation receded once supply chains normalised," he noted.
Speaking about central banks in the Global South, Das remarked that achieving price stability amid uncertainties has become a cornerstone of monetary policy for these nations.
He highlighted the challenging growth-inflation trade-offs faced by the Global South, where economic development and poverty alleviation remain critical priorities.
Das concluded by stating that price stability is fundamental to achieving sustained high growth, as it reduces uncertainty, encourages investment, and protects the purchasing power of the most vulnerable populations.
✔️ RBI Gov Das stresses on price stability as key to economic planning and growth
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