RBI monetary policy: Why Shaktikanta Das said 'the elephant has gone out for a walk'

RBI Monetary Policy Meeting: “The elephant has now gone out for a walk,” said RBI governor Shaktikanta Das as part of his monetary policy statement. So what did Shaktikanta Das mean and what is this elephant that he spoke of? The Reserve Banking of India (RBI) in its first Monetary Policy Committee (MPC) meeting for the new fiscal year 2024-25 kept the key repo rate unchanged at 6.5%.This was done keeping in mind the robust GDP growth numbers and the need to bring down inflation further.
According to Shaktikanta Das, two years ago, inflation was the elephant in the room. “Two years ago, around this time, when CPI inflation had peaked at 7.8 per cent in April 2022, the elephant in the room was inflation. The elephant has now gone out for a walk and appears to be returning to the forest,” he said.
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“We would like the elephant to return to the forest and remain there on a durable basis. In other words, it is essential, in the best interest of the economy, that CPI inflation continues to moderate and aligns to the target on a durable basis. Till this is achieved, our task remains unfinished,” Shaktikanta Das said.
The RBI governor stressed on the need to not be distracted in the fight against inflation. “The success in the disinflation process so far should not distract us from the vulnerability of the inflation trajectory to the frequent incidence of supply side shocks. Our effort is to ensure price stability on an enduring basis, paving the way for a sustained period of high growth,” he said.
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According to Das, The Monetary Policy Committee met on 3rd, 4th and 5th April 2024. After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, it decided by a 5 to 1 majority to keep the policy repo rate unchanged at 6.50 per cent.
“Looking ahead, robust growth prospects provide the policy space to remain focused on inflation and ensure its descent to the target of 4.0 per cent. As the uncertainties in food prices continue to pose challenges, the MPC remains vigilant to the upside risks to inflation that might derail the path of disinflation,” he said.