Should onions decide the course India takes? RBI Governor answers


Kolkata: Reserve Bank of India (RBI) Governor Shaktikanta Das has set broader financial stability as the central bank’s immediate policy-making priority amid concerns over the failure of some non-bank lenders and weaknesses of banks, expanding the remit of balancing growth and inflation.

“The regulation and supervision of banks and nonbank financial intermediaries has rested with the Reserve Bank and has kept pace with the prescribed global norms over time. More recently, the focus of financial stability has not only confined to regulation and supervision but also extending the reach of formal financial system to the un-banked and unserved population,” Das said in a speech.

He said the focus on price stability as the sole objective of monetary policy has been questioned after the global financial crisis, underscoring the need for adopting a flexible inflation target to achieve macro-financial stability.


“In this milieu, financial stability has emerged as another key consideration for monetary policy, though jury is still out as to whether it should be added as an explicit objective,” he said at St Stephen’s College in Delhi on Friday.

RBI has recently reorganised its regulatory and supervisory structure by integrating the supervision function into a unified Department of Supervision and regulatory functions into a unified Department of Regulation amid growing inter-linkages in the financial system, and criticism that gaps in its inspection failed to detect faultlines.

The relative emphasis on inflation, growth and financial stability has varied across monetary policy regimes in response to challenges of that time.

Governor Das also told students that the assessment of the current economic situation is one of the major challenges for the central banks.

“A view has to be taken on the true nature of the slack in demand and supply-side shocks to inflation for timely use of counter cyclical policies,” Das said in a speech at Friday.

He reiterated that the government needs to push more structural reforms and take fiscal measures to revive demand and boost growth since monetary policy has limitations.

RBI has projected the economy to grow at 5% for 2019-20, after revising its previous forecast of 6.1% growth.

“Monetary policy, however, has its own limits. Structural reforms and fiscal measures may have to be continued and further activated to provide a durable push to demand and boost growth,” he said.

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