RBI Governor says it's too early to discuss changing interest rates due to current inflation levels.

In an interview with CNBC-TV18, Reserve Bank Governor Shaktikanta Das shared his thoughts on the current state of the economy. He stated that it would be premature to consider changing the stance on interest rates, given the current inflation rate and the target set by the RBI of 4 per cent. Das pointed out that the journey towards achieving this target has been progressing as expected, but the last mile will be the most challenging.

According to the June bi-monthly report, the RBI has projected a Consumer Price Index (CPI) based retail inflation rate of 4.5 per cent, with quarter-wise projections of 4.9 per cent in Q1, 3.8 per cent in Q2, 4.6 per cent in Q3, and 4.5 per cent in Q4. The central bank takes into account the CPI while making decisions related to the monetary policy, as it is responsible for maintaining the inflation rate at 4 per cent.

Das also mentioned that while there has been a slight moderation in headline inflation in March-April, food inflation continues to be a concern, particularly in the pulses and vegetables category where rates remain in the double digits. The prices of vegetables have increased due to the summer season, after a brief correction in the winter. On the other hand, there has been a deflationary trend in fuel prices, primarily due to cuts in the price of LPG in March.

He further elaborated that core inflation has been on a downward trend for the past 11 months and services inflation has reached a historic low, while goods inflation remains under control. When it comes to GDP growth, Das expressed confidence in the economy, stating that various factors are contributing to its growth. He noted that the momentum of growth was strong in the fourth quarter of the previous financial year and continues to be strong in the first quarter of this year.

In its June policy, the RBI revised its GDP growth projection for the current fiscal to 7.2 per cent from 7 per cent, citing an increase in private consumption and a revival of demand in rural areas. If the projected GDP growth rate of 7.2 per cent is achieved in 2024-25, it will mark the fourth consecutive year of growth at or above 7 per cent. These positive developments indicate a promising future for the Indian economy.

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