RBI Governor stated that there is no new stress building up in the banking system currently but urged the lenders to continue with stress testing
RBI keeping Arjuna’s eye on 4% inflation mark: Das
FinTech BizNews Service
Mumbai, November 21, 2023: Shaktikanta Das, Governor, RBI today emphasized that the monetary policy actions of RBI over the last 1.5 years consisting of prioritization of inflation ahead of growth, narrowing the Liquidity Adjustment Facility (LAF) corridor, increasing the policy repo rate by 250 bps, draining out excess liquidity - together with supply side measures by the Government, have facilitated significant softening of headline inflation to 4.9 per cent in October 2023. The moderation in core inflation is noteworthy. “We are completely focused on the 4 per cent target and we maintain Arjuna’s eye on the inflation target,” he stressed.
Addressing the ‘FIBAC 2023’ on the theme – ‘Winning in Uncertain Times’, jointly organized by FICCI and IBA, RBI Governor Mr Das added that there is also recent evidence of household inflation expectations becoming more anchored. “Headline inflation, however, remains vulnerable to recurring and overlapping food price shocks coming from global factors and adverse weather events. The frequency and intensity of such shocks have increased in recent period. Monetary policy in such a scenario needs to remain watchful and actively disinflationary while supporting growth.”
Speaking on the Indian GDP, Mr Shaktikanta Das stated that the Indian economy rebounded strongly from the COVID induced contraction of 5.8 per cent in 2020-21 to a growth of 9.1 per cent in2021-22 and 7.2 per cent in 2022-23. “India’s real GDP is expected to grow by 6.5 per cent in both 2023-24 and 2024-25, making it one of the fastest growing large economies in the world. India is already the third largest economy in the world in terms of purchasing power parity (PPP). Despite global slowdown, the Indian economy has remained resilient and continued to grow due to its higher reliance on domestic demand which enabled the economy to weather multiple global headwinds. Although India has made rapid strides in external openness through trade and financial channels and gained competitiveness, its dependence on domestic demand provides a cushion against external shocks. Various structural reforms implemented in areas of banking, taxation, inflation management and manufacturing sector, etc. over the last few years, have laid the foundation for sustainable and higher growth,” noted the RBI Governor.
He further stated that there is no new stress building up in the banking system currently but urged the lenders to continue with stress testing. “India’s growth journey with active participation of manufacturing and services sectors and dependence on domestic demand could be self-fulfilling in the years to come. We are living in highly uncertain times in an interconnected world and there is a need to further build on resilience which would be the best insurance against shocks and uncertainties. The international confidence on India’s prospects is at a new high; it is an opportune time to make this India’s moment and work towards strong, sustainable and inclusive growth,” emphasized Mr Shaktikanta Das.
Mr Subhrakant Panda, President, FICCI said that the journey to being a $ 5 trillion economy and beyond, not to mention action to mitigate climate change, requires large amounts of capital. “Banks and financial institutions need to work together to build ecosystems around under-served segments like logistics, healthcare, etc. Given India’s stable foreign exchange reserves, FICCI has in the past suggested allocating a small portion, around 10 per cent to enable lending to long gestation projects and export driven sectors,” he added.
Mr AK Goel, Chairman, IBA said that building resilience will not happen overnight as it requires capital, astute planning with strategies along with global risk management systems, good governance and investment in the human capital. He further stated that the global uncertainties cannot be totally mitigated. It can be managed by appropriate policies action and strategies to build resilience to absorb the shocks and stay in a position to benefit of new opportunities, he added.
Mr Sunil Mehta, Chief Executive, IBA said, “Uncertainty is the way of life and managing the uncertainty is going to be the way forward. The proactive steps taken by the regulator have helped the economy in general, industry and MSMEs in particular along with the banking sector.”
Mr Shailesh K Pathak, Secretary General, FICCI delivered the vote of thanks.