India’s central bank is in no hurry to reverse course on record low interest rates despite mounting worries around inflation, Reserve Bank of India Governor Shaktikanta Das told CNBC.

“We are constantly monitoring the situation and we will act at the appropriate time. At the current juncture, we feel that appropriate time has not come,” Das told CNBC’s Tanvir Gill.

The RBI last slashed its repo rate — the rate at which it lends to commercial banks — in May 2020 and has maintained an accommodative monetary policy stance to help India get its economy back on track.

Since last year, the central bank has introduced several dozen measures aimed at boosting growth and mitigating the impacts of Covid-19 on the economy.

Once the “revival of economic activity shows signs of durability, signs of sustainability, I think that should be an appropriate time for the Reserve Bank, or for the monetary policy, to think of, or perhaps consider a change in course,” he said in a pre-recorded interview on Thursday.

All our actions will be calibrated, they will be well-timed, they will be cautious.

Shaktikanta Das

Governor, Reserve Bank of India

He added that the central bank will not announce any policy shifts without first preparing the markets.

“All our actions will be calibrated, they will be well-timed, they will be cautious,” Das said. “We don’t want to give any sudden shock or any sudden surprises to the markets.”

Growth momentum

Inflation is ‘transitory’

I would not put stagflation as an issue on the table for discussion in the context of India.

Shaktikanta Das

Governor, Reserve Bank of India

While the RBI’s inflation target is 4%, it allows consumer prices to fluctuate in a range between 2% and 6%. India’s retail inflation remained above 6% year-on-year in May and June, before moderating to an estimated 5.59% in July.

“Current inflation looks transitory,” Das told CNBC, adding that the central bank expects inflation to moderate in the coming months.

He dismissed the idea that India might get caught in a stagflation — a situation where a country’s growth rate is low, unemployment rate is high, and consumer prices are rising.

He explained that the thinking at the central bank is that most of the inflationary pressure at the moment is coming from the supply side — once businesses and policymakers solve the pending supply issues, inflation will likely moderate.

“RBI remains fully conscious of its responsibility to anchor inflation expectations,” the governor said, adding that the central bank will “ensure that the inflation does not become uncontrollable. It will be dealt with.”

When asked if the central bank may shift away from its accommodative stance at its October policy meeting, Das said it would depend on how the economic situation and inflation scenario evolve.

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