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Reserve Bank of India Governor Shaktikanta Das on Friday noted that monetary policy has its own limits and structural reforms and fiscal measures may have to be continued and further activated to provide a durable push to demand and boost growth.
Das emphasised that he has previously highlighted some potential growth drivers which, through backward and forward linkages, could give significant push to growth.
“Some of these areas include prioritising food processing industries, tourism, e-commerce, start-ups and efforts to become a part of the global value chain,” he said, adding that the government is also focusing on infrastructure spending, which will augment growth potential of the economy.
He further said States should also play an important role by enhancing capital expenditure which has high multiplier effect.
Das noted that one of the major challenges for central banks is the assessment of the current economic situation. The RBI has to constantly update its assessment of the economy based on incoming data and survey based forward looking information juxtaposed with model-based estimates for policy formulation. “This approach helped the Reserve Bank to use the policy space opened up by the expected moderation in inflation and act early, recognising the imminent slowdown before it was confirmed by data subsequently,” he said.
Elaborating on the broad objectives of monetary policy framework in the country, he said it has evolved in line with the developments in theory and country practices, the changing nature of the economy and developments in financial markets. “Within the broad objectives, however, the relative emphasis on inflation, growth and financial stability has varied across monetary policy regimes,” he said adding that the RBI has also always given due importance to financial stability.
The regulation and supervision of banks and non-bank financial intermediaries as well as more recently, extending the reach of formal financial system to the unbanked and underserved population is also part of its responsibility on financial stability, he said.
“Apart from financial inclusion, there is also a focus on promoting secured, seamless and real-time payments and settlements,” Das further said.
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