There is space for further monetary policy action, says Shaktikanta Das

Reserve Bank of India can further cut interest rates, said RBI governor Shaktikanta Das, while speaking at an event on Monday, Das said that there is scope for cutting interest rates further and the central bank will use it when required after studying growth and inflation data. The statement comes days after RBI had surprised everyone by holding rates steady after trimming the key interest rate by 135 basis points since the beginning of the current rate reduction cycle in February.

Das said that RBI have very carefully and very definitely said there is space for further monetary policy action but the timing will have to be decided in a manner that its impact is optimum and its impact is maximised. Das said that the markets were surprised when the committee started cutting rates in February but subsequently accepted that it was right in doing so. 

He further said that the government and the central bank had taken steps to help the economy recover but the outcome of events in the global economy would play a role. Talking about the US trade deal, Das said that he hopes a recent trade deal between the United States and China would hold and not be reversed. The "Phase one" agreement reduces some US tariffs in exchange for a big jump in Chinese purchases.

He also stated that What is important in the current context is co-ordinated and timely action by all the advanced and emerging economies to revive growth.

Further, he added that growth is an issue of discussion in India and global growth is also an issue of discussion because that does impact. "For a moment, I am not implying that slowdown that we have seen in India is entirely due to global factors, but it does impact growth prospects for India," he added. 

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India`s annual economic growth slowed to 4.5% in the July-September quarter, its weakest pace since 2013, putting pressure on Prime Minister Narendra Modi to speed up reforms.

Das also stressed the importance of communication for the markets and said the RBI had tried to be as clear and transparent as possible. "Of course, communication should follow the action and any communication should not be empty words, it should be followed by further action," Das added.