'NBFC action not punitive, but corrective'

Reserve Bank of India RBI) Governor SHAKTIKANTA DAS refused to drop his guard on inflation, citing major upside risks while remaining sanguine on growth. In an interaction with Tamal Bandyopadhyay during the Business Standard BFSI Insight Summit, he said the Indian financial sector was resilient enough to deal with any spillover from the external world ona day markets turned volatile following the US election results. Edited excerpts:

- SHAKTIKANTA DAS

What will the outcome of the US presidential election mean for India?

There are two major international events awaited by the markets-the outcome of the presidential election in the US, and the fiscal policy support expected to be announced by the Chinese authorities.

I believe that, overall, India-US relations have become much stronger. There is a strategic partnership between the two countries that will continue irrespective of who wins.

The Indian economy and financial sector are now well-placed and very resilient in dealing with any kind of spillover coming from the external world. We are bystanders in what is happening there (in the US), but we are watching. However, when it comes to our domestic market, as a regulator, we are not bystanders.

Following the change in stance, the market was expecting a rate cut in December. However, in your recent commentary, you said a rate cut would be premature. How should we read your commentary?

Our communication has been very consistent. The change in stance gives us flexibility and optionality to decide the future course of action.

We changed the stance because the monetary policy committee felt that growth and inflation are now well-balanced and well-poised, making it appropriate to change the stance. However, there are major upside risks to inflation from continuing geopolitical conflicts, geo-economic fragmentation, climate-related risks, and rising commodity prices.

I believe the message was clear that we must be very cautious in our future course of action. It should not be assumed that because we have done this, the next course of action is a rate cut. A change in stance does not mean that the next step is a rate cut in the very next meeting. The next step has to be taken very carefully so far as inflation is concerned.