RBI Governor Shaktikanta Das said the global economy is now facing a tirade of challenges.
New Delhi: RBI Governor Shaktikanta Das on Friday addressed the inaugural session of the Kautilya Economic Conclave 2023 and said the digital payments have made monetary policy transmission quick and effective.
Shaktikanta Das also added that the global economy is now facing a tirade of challenges. “First, slow moderation in inflation, which is getting interrupted by recurring and overlapping shocks. Second, slowing growth, and that too is fresh and enhanced obstacles. And third, lurking risks of financial stability,” he said.
The RBI governor said the Central banks with price stability as their primary objective have raised policy rates aggressively while signalling to keep the rates higher for longer.
“Some of the central banks have taken a pause on rate hikes. Financial stability concerns have conditioned this pursuit… Financial markets have become highly sensitive to every piece of new information,” he said.
Saying that policymaking has become extraordinarily complex in the middle of such a confluence of factors, he said additional dimensions of policy dilemma present themselves and hamstring the responses of the central banks.
“Conflict may arise between the requirements of price and financial stability, but policymakers have to trade a fine balance as it is important to recognize that price and financial stability reinforce each other in the medium to the long term,” he added.
On India’s financial stability and crude oil prices, the RBI Governor said there is a multiplicity of factors. “The dollar index has become quite strong. The bond yields in the US have reached an all-time high, but, if you look at the volatility of the Indian rupee from January 1 this year till now, the rupee depreciation is 0.6 per cent… Whereas on the other hand, the appreciation of the US dollar for the same period has been in the order of about 3 per cent. So the rupee is stable,” he said.
On Israel-Hamas conflict, the RBI Governor said what is different in the context of India? “Of course, we are impacted by what is happening all over, no doubt on that… Our microeconomic fundamentals continue to be sound, and our financial sector continues to be sound. Eventually, in these uncertain times, what matters is how strong are your microeconomic fundamentals, how strong is your financial sector? I think on both the parameters, India is well placed,” he said.