mobile
 
CII Media Releases
 
RBI continues to be supportive of growth: RBI Governor at CII Meet Adds: ongoing crisis in Europe could impact inflation in India, but possibility of a prolonged breach of the tolerance band remote; RBI committed to and confident of dealing with any emerging challenge Keep interest rates unchanged for some more time: President CII
Mar 21, 2022

“The Reserve Bank of India is committed to and confident of dealing with any emergent challenge”, said Shri Shaktikanta Das, Governor RBI, while addressing the CEOs at the CII National Council Meeting held at Mumbai today.

Acknowledging the prevailing global uncertainties and also the fact that the primary responsibility of the RBI is to maintain price stability, Governor Das said that though the current crisis in Europe could have an impact on inflation in India, the possibility of a prolonged breach of the laid down tolerance band is remote. He added that RBI has resisted the ‘temptations’ and ‘expectations’ of reversals in monetary policy, in the past when CPI inflation was temporarily higher than its tolerance limit of 6%. This was because a pre-mature demand compression through monetary policy interventions would have hurt the economic recovery. He added that RBI maintains its pro-growth stance.

Expressing his confidence in the strength of the Indian economy, Governor Das shared that most of the sixty high frequency indicators that RBI monitors regularly, are in the ‘green’. He further reasoned that unlike at the time of the taper tantrum of 2013, India has a very strong foreign exchange reserve position allowing it to finance a higher level of current account deficit, should the need arise.

On the exchange rate, he stated that the policy of the RBI has been to intervene only to address excessive volatility. The Indian rupee has deprecated only by 0.4% this fiscal till March 17th and given its reserves, RBI is confident of exchange rate stability.

Sharing his views on the possible spill over effects of monetary tightening in other parts of the world, Governor Das said that while the US and the European nations have started to reduce asset purchases, RBI stopped its asset purchase program in October itself, and “in that sense RBI is not behind the curve”.

He also pointed to the large gaps between the targeted inflation and the actual inflation in the developed economies, which is not the case in India. He reiterated that RBI will be able to manage spill over effects on the foreign exchange rates, if any.

Governor Das assured adequate liquidity to meet the credit needs of the economy, He opined that the banks are in a strong position. The capital adequacy at 16%, at the system level, is higher than the regulatory requirement. The gross NPAs of the banks are at an all-time low of 6.5%.

Earlier in his address, while summarising the RBI’s approach over the last two pandemic-stricken years, Governor Das said that the immediate effort was to ensure that the markets continued to function well. The cost of money was kept low by reducing the repo rate and liquidity was infused through LTROs.

Further all the regulatory relief measures and liquidity measures were announced with sunset date, to ensure a smooth and well-planned exit. The bi-monthly monetary policy statements were used as an effect communication tool to provide confidence and forward guidance to the market players which helped mitigate uncertainty.

Delivering the opening remarks, Mr T V Narendran, President CII, suggested that given the current global macro-economic uncertainties which could impact Indian economy, RBI should continue with an accommodative monetary policy stance for some more time keeping the interest rates unchanged. He elaborated, “the risk in the monetary policy responding now to the possibility of higher inflation or even the reality of inflation being somewhat outside the tolerance band, is that the move could stifle growth and we are not yet sure that the high crude and commodity prices are here to stay”.

21 March 2022

New Delhi

Email to a friend   Print
Related Information
Download CII App:
App Store Google Play