With crude oil prices crossing the $95 a barrel mark and threatening inflation in India, the Reserve Bank of India (RBI) on Monday said inflation projections are robust and the central bank is committed to the targets. Addressing a joint press conference, Finance Minister Nirmala Sitharaman also touched upon cryptocurrencies and said the government and the RBI are on the same page on issues related to them.
Earlier in the day, Sitharaman had addressed the Central Board of Directors of the RBI in its customary post-Budget meeting, after which RBI Governor Shaktikanta Das responded to several questions on inflation. He said crude prices were hovering around 70 a few months ago before settling at 80-85 for some time. He clarified that the calculation (on inflation) was made for 365 days based on a range of prices, and not just the price for a particular day.
“So, at this point of time, our projections are robust and we stand by it,” said Das, while also adding that if there were something unforeseen and unexpected, the case would be different. Also, projections are contingent on the downside and upside risks associated with the movement of global crude oil prices.
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Talking about the inflation target range, the RBI governor said the headline number touching the upper range should not come as a surprise or set off any alarms because the Monetary Policy Committee has taken it into consideration. “There’s a sort of major delicate balance between inflation and growth, and the Reserve Bank is fully aware of its commitment to inflation,” he added.
Das also reiterated that the inflation trajectory was on a downward slope since October, but acknowledged that there is some rise. “It’s primarily the statistical reasons, the base effect which is leading to higher inflation especially in the third quarter, and the same base effect will play in different ways in the coming months,” he said.
Meanwhile, responding on a question on cryptocurrencies, the Finance Minister said the government and the central bank are working in a partnership.
The government has proposed taxes on crypto in the Budget which is being seen as a move to give it recognition. Last week, the RBI governor had said private cryptocurrencies are big threats to the country’s financial and macroeconomic stability, and that they will undermine the RBI’s ability to deal with such issues.
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“(Between) The RBI and the ministry, not just on crypto but also on every other thing as well, I think there’s complete harmony with which we’re working, respecting each other’s domain, knowing what we’ve to do with each other’s priorities and in the interest of the nation. There’s no turfing here. There is a level of partnering happening here,” said Sitharaman. She also clarified that there was no question of tying RBI’s hands as the government did discuss the move proposed in the Budget.
‘India well placed’
In response to the US Federal Reserve’s proposed move to raise interest rates, Das said this time, there would not be any tantrum like in 2013 as the Fed is giving enough time before the move. He also said India is well placed to deal with the winding up of liquidity globally.
“We are continuously monitoring global developments and are prepared to deal with spillovers. We have strong forex reserves of $632 billion,” he said, adding that this reserve, combined with the quantum of forex the country holds in the forward market makes India well-placed to deal with global spillovers.
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ABG Shipyard’s account declared NPA during UPA
Meanwhile, Sitharaman said the ABG Shipyard account had turned an NPA during the erstwhile UPA regime and that the banks took lesser than normal time to detect the fraud perpetrated by the shipping firm.
“This is actually an account which became an NPA before January 2014. In fact, it was declared an NPA in November 2013,” Sitharaman said. Last week, the Central Bureau of Investigation (CBI) had booked ABG Shipyard Limited, its former chairman and managing director Rishi Kamlesh Agarwal and others for allegedly cheating a consortium of two dozen banks.
She said in general, for any account where there is a fraud element, it takes almost 52-54 months to complete the investigation. “In this particular case, I should say the credit goes to the banks and they have taken less than what is normally an average time to detect these kinds of fraud. Then forensic audit was done. Everything else was collected and handed over to the CBI in 2020 which finally filed two cases in 2022. In the meantime, the whole thing went in NCLT for resolution,” she said.
This issue has evoked strong criticism from the Opposition. However, the FM rejected all the allegation and said: “Those making noise about it have dug holes into which they themselves fall.”