India's economic growth is unlikely to get much of a hit due to the second wave of Covid-19, RBI governor Shaktikanta Das said on Thursday.
“My understanding and our preliminary analysis show that the growth rate in next year, that is 10.5 per cent (RBI forecast for FY22), which we had given in the policy would not require, I repeat, would not require a downward revision," Das said.
A renewed surge of Covid cases in many parts of the country is a matter of concern, but this time around, vaccinations are taking place, and overall, the people are more used to the Covid protocol.
“At this point of time, one does not foresee the kind of lockdown that we experienced last year. Last year came as a huge shock, but this time, we know what Covid-19 pandemic is all about, notwithstanding some new strains in development. So, there is a feeling that the revival of economic activity continues unabated going forward,” the RBI governor said on the sidelines of an economic conclave organised by Times Network.
The RBI is scheduled to announce its monetary policy in the first week of April.
Governor Das said that there is no 'fight' between the bond market and the central bank.
"What we are emphasising, time and again, is that there should be an orderly evolution of the yields and not sudden spikes or any knee jerk reactions to certain incoming numbers.”
The central government’s net borrowing for this year is Rs 9 trillion, and in the current year, the RBI has made an open market purchase of government bonds worth Rs 3 trillion.
“So next year, it's not going to be any less than that if at all, it will be more. And we have also given special dispensation with regard to the held to maturity basket, which makes for another Rs 4 trillion. So, Rs 7 trillion is already available, and the gap is only Rs 2 trillion. And we are confident that we will be able to manage it,” the governor said, adding an “orderly evolution of the yield curve is very important” as disorderly spikes in yields can act as an impediment for growth and will undermine the economic recovery, and the government bond yields work as the benchmark for others to borrow from the market.
"RBI’s foreign exchange reserves accumulation is for its own needs. The expansionary monetary policy of advanced economies will unwind at some stage and that will have a spillover impact on the emerging market economies. The emerging markets will have nowhere to go but to look at their own coffers. So, the RBI is building up its own coffers," he added.
RBI, Das said, will endeavour to keep the rupee stable. In terms of bank privatisations, the RBI is constantly engaged with the government and the Centre “always takes into consideration the viewpoint of the regulator”.
The Reserve Bank of India (RBI) is also working on a central bank digital currency (CBDC), but with utmost precaution, governor Shaktikanta Das said on Thursday.
"While we are working on introducing a digital version of the fiat currency, the Reserve Bank is also assessing the financial stability implications of introducing such a Central Bank Digital Currency (CBDC),” governor Das said in his keynote speech at an economic conclave organised by the Times Network.
“As the underlying technology is still developing, we are exploring ways for a clear, safe and legally certain settlement finality, which is most crucial for a secure and efficient payment system. It also needs to be appreciated that there are not many practical instances of operationalisation of CBDC across the world; this calls for utmost precaution so that we can produce a safe and robust model," Das said.
Governor Das said the Unified Payment Interface (UPI) has the potential to “unfold into a cheaper and faster alternative to available means for multilateral cross-border payments as well.” RBI’s Real Time Gross Settlement System (RTGS) has multi-currency capabilities and with 24x7 operations now, “there is a scope to explore whether its footprints could be expanded beyond India," governor Das said.
“With the Reserve Bank at the forefront of nurturing innovation, the day is not far, when we will experience cheaper, faster and safer cross border remittances,” he said adding, the homegrown RuPay card network might “make a mark in the global financial landscape, going forward.”
India is also on the way to becoming Asia’s top financial technology (fintech) hub with 87 per cent fintech adoption rate as against the global average of 64 per cent. The fintech market in India was valued at Rs 1.9 trillion in 2019 and is expected to reach Rs 6.2 trillion by 2025 across diversified fields, the RBI governor said.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU