Growth momentum strong; Q2 GDP to throw surprise: RBI Guv
Das said geopolitical uncertainties are the biggest risk to global growth at present, but India is better placed to handle it as compared to other countries.
Reserve Bank of India
MUMBAI: Reserve Bank of India Governor Shaktikanta Das on Tuesday said the growth momentum continues to be strong, and the official data for GDP expansion in the second quarter will surprise on the upside.
Speaking at an event here, Das said inflation is the first priority for the RBI at the moment. “Looking at the momentum of economic activity, looking at a few early data points that have come in a few early indicators, I can say that the second quarter GDP number as and when it is released at the end of November, in all probability will surprise everyone on the upside,” Das said.
He said the RBI estimates the real GDP growth for the second quarter of the current fiscal to come at 6.4 per cent.
Das said geopolitical uncertainties are the biggest risk to global growth at present, but India is better placed to handle it as compared to other countries.
The governor said rates in advanced countries and other international factors are taken into consideration while formulating the monetary policy, but was quick to add that eventually the monetary policy is driven by domestic factors of inflation and growth.
“Our monetary policy is not influenced by what is the differential in bond yields (between India and the US) or if currency is depreciating,” Das said.
When asked about the country’s inclusion in the J P Morgan global bond indices, Das initially admitted that this is a double-edged sword with positives and negatives, but sought to allay fears saying any large volatilities in the financial markets are unlikely.
He said the move can get an additional $25 billion into the country as estimated by analysts, but it can potentially lead to an outflow as passive investors’ money can move out as the country weightage moves.
“We can handle large-scale inflows (and) large-scale outflows. So, therefore, I don’t think we will see that kind of volatility. I think the RBI has the capacity to deal with it effectively,” Das said.
He said the move to include the country in the indices announced last month speaks of confidence in the country’s economy and the financial markets. Das also said attrition is seen to be high at some private sector banks and that the central bank is watching the issue “closely’’. The RBI is looking at the issue as part of the regulatory supervision efforts, he added.
In the comments that come amid some major banks reporting attrition rates of over 30 per cent, Das said every bank has to build a core team to take care of such issues.
