RBI-Govt ties strongest in last six years
MUMBAI: Balancing inflation and economic growth will remain one of the key tasks for the Reserve Bank of India, said the outgoing Governor Shaktikanta Das during his final press conference at the central bank’s headquarters in Mumbai on Tuesday.
Das, the 25th Governor of RBI, who demitted the office after a six-year term, has underlined the need for restoring the inflation-growth balance as the most important engagement for his successor Sanjay Malhotra, to whom he will pass on the baton on Wednesday.
Underlining the strong coordination between the RBI and the government during his governorship—something that was highly frayed during the governorships of his two immediate predecessors, Das claimed, “the coordination between RBI and finance ministry during the last six years was at its best.”
“There was wide-ranging consultative approach during his six-year tenure, which he had outlined at the start of his term. And that the perspectives of the finance ministry and the RBI can differ at times, but during the past six years all such issues were resolved through internal discussions and coordination,” Das said.
It can be noted that the government brought in the seasoned bureaucrat Das as a measure to correct the deep imbalances and discords that marked the tenors of Raghuram Rajan and Urjit Patel, who both were career economists of global repute. They publicly differed on a host of issues including on the question of RBI autonomy, public calls from government on interest rates and taking out RBI surpluses and a portion of the forex reserves to bridge the fiscal gaps of the government.
Listing out other challenges for his successor, Das said the new governor will also have to navigate the changing world order, effectively deal with cyber threats, and focus on harnessing new technologies. He also expressed optimism that the new governor will carry forward the many initiatives that the RBI began under his watch such as the Central Bank Digital Currency (CBDC) and unified lending interface (ULI) which are being piloted now and will soon be rolled out nationally, besides promoting financial inclusion.
To a specific question on the growth slump and higher interest rates, Das said “everyone is entitled to their views but as he looks at it, growth is impacted by multiplicity of factors, not just the repo rate. The fact is that our economy is resilient and robust with capacity to deal with global spillovers very effectively”.
He further said the RBI will have to keep in mind the requirements of the wider economy as eventually it is a judgement call that every governor takes.
The economy slowed to near two-year low of 5.4 percent in the September quarter of this fiscal due to poor performance of manufacturing and mining sectors. This came after gross domestic product had expanded by 8.1 percent in the September 2023 quarter and closing that year with 8.2 percent growth.
The Q2 numbers stumbled RBI as it had projected a 7 percent growth for the quarter as late as October when it stuck to 7.2 percent growth for the full fiscal. But at the December policy RBI lowered its forecast sharply down to 6.6 percent and increased the inflation forecast to 4.8 percent.
The outgoing Governor further said as a key national institution, the RBI will face the continuing challenge of cyber security, but it will also need to harness the positive benefits from the new technology too, and mentioned that CBDC with a huge potential is the “future of currency.”
“We have given lot to attention to cyber security. That is a continuing task. It will be a ongoing challenge for every central bank including RBI,” Das said.
Shaktikanta Das’ tenure as Governort saw the RBI launching several innovative products including the UPI (unified payment interface), which he said has emerged as a pioneer in the global payments system. He further said the soon to be pan-India rollout of the unified lending interface, aimed at streamlining and speeding up loan approval process to help borrowers avail credit while ensuring that lenders process customer information with ease.
He also said the supervisory methods of the central bank has “significantly improved and are much sharper now.”