E-Rupee: RBI’s big out-of-the-box moment is still to come
A heady air of mutual—and self— congratulation hovered over the Reserve Bank of India’s (RBI) 90th-year celebration held on 1 April. It was almost palpable in the speeches made.
Governor Shaktikanta Das said that “well-calibrated and coordinated monetary and fiscal policies" between RBI and the Centre had “shielded the economy from shocks" like covid and two wars. The central bank’s chief expressed satisfaction that “today our GDP growth is robust, inflation is moderating, financial sector is stable, the external sector remains resilient and forex reserves are at an all-time high." He gave key reforms like the 2016 insolvency code and RBI’s legal mandate to tame retail prices due credit.
Finance minister Nirmala Sitharaman lauded RBI’s pandemic package of credit and debt relief and hailed its role in the rupee’s external stability (in peer comparison) and an orderly yield curve for Indian bonds. Prime Minister Narendra Modi urged RBI to think out of the box on credit, calling Das an expert at it, noted RBI’s success in the context of reform enablers, and spoke of more to be done.
The heady air at the venue was better deserved than what the optical demands of poll season may suggest. By any reckoning, India’s economy has emerged quite well from the covid blow four years ago, thanks to a decisive yet judiciously restrained mix of stimulus—fiscal and monetary both.
Yet, premature exultation is best resisted. While covid forced a breach of Indian rules not just on the fiscal deficit but also price stability, with RBI notching up an official target failure not long ago, the central bank still hasn’t shown success at holding prices steady over a span of time long enough for us to think of an internally stable rupee as a given,
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