The Indian economy is far better placed in the current global milieu, which is unimaginably uncertain, according to Reserve Bank of India (RBI) Governor Shaktikanta Das.

The Governor emphasised that the RBI has resisted all expectations and temptations to reverse the monetary policy and move away from accommodative stance, which is supportive of growth, into a kind of tightening regime.

“Looking at the current situation and prospects, I think, overall Indian economy is far better placed ... As far as India is concerned, even now the high frequency indicators of economic activity are in the green zone. In the run up to the current crisis (war in Ukraine), our current account deficit is very low. And secondly, our forex reserves are very high,” Das said in his address at the CII National Council.

He noted that the process of recovery is on and the RBI, for the last two years, has remained supportive of growth. “... And we have resisted all expectations and all temptations of reversing our monetary policy ... There is a reason for that ... because we could clearly foresee that inflation will moderate and it did moderate.”

Forex reserves

Das underscored that over the last three years India’s forex reserves have gone up by $270 billion or so. Today, the forex reserves are at $622 billion. Other than that, the country holds a lot of forex ($55 billion) in forward assets, which will mature in the coming months.

“India is comfortably placed to deal with any effect of spillover or any challenge with regard to financing of current account deficit. FDI inflow is also expected ... I can say with reasonable amount of confidence that we will be able to maintain stability of rupee,” the Governor said.

While noting that the rupee has depreciated 0.4 per cent vs the US dollar in the current financial year up to March 17, he said the RBI intervenes only to prevent excessive volatility in the domestic unit.

The Governor emphatically stated that the RBI is watchful and monitoring all the trends with regard to economic activity, inflation and growth. “We are watchful but at the same time, I can say that we stand committed and we are confident of dealing with any emerging situation and challenge. That kind of commitment and confidence is there in RBI,” he said.

Liquidity withdrawal

Das also stressed that there will be abundant liquidity to meet the productive requirements of the economy.

“Our effort has been to ensure that the whole process of both liquidity injection as well as withdrawal takes place in a very non-disruptive manner,” he said.

Going beyond rule book

The Governor said the RBI’s approach during the last two years has been one of going beyond or looking beyond the rule book when it comes to dealing with problems at banks, NBFCs and the economy. “It is not as if a problem is there and a rule is there and the rule says that if this happens do this. Now that is not enough when you are dealing with a pandemic related uncertainty. That is not enough when we are now looking at the new crisis which we are confronted with because of the war in Ukraine. So, therefore, RBI has gone much beyond the rule book. We have tried to be as innovative as possible,” he explained.