‘Govt should continue structural fiscal reforms’, says RBI Governor

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(Online Desk)

As the upcoming Budget will be presented in the backdrop of a slowing economy, Reserve Bank of India (RBI) Governor Shaktikanta Das has a word of advice for Finance Minister Nirmala Sitharaman. Das on Friday called for structural reforms and more fiscal measures to revive economic growth, saying monetary policy has its own limitations to achieve these objectives.

“Monetary policy 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,” Das said, addressing students of St Stephen’s College, Delhi, his alma mater.

This comes when the advance estimate of GDP has projected nominal growth plunging to a 48-year-low of 7.5 per cent and real growth hitting an 11-year low of 5 per cent and inflation going up.

The RBI governor has called for prioritising food processing industries, tourism, e-commerce and start-ups and also making the domestic economy a part of the global value chain. Das urged states to play an important role by enhancing capex, which has high multiplier effect and can boost the Centre’s focus on infrastructure spending.

Correct assessment of the current economic situation and formulating the necessary monetary policy is a challenge now, he admitted. “One of the major challenges for central banks is the assessment of the current economic situation. The precise estimation of key parameters such as potential output and output gaps on a real-time basis is a challenging task, although they are crucial for the conduct of monetary policy,” Das said. In the last monetary policy, RBI had downgraded growth forecast for this fiscal to be 5 per cent. “The shifting trend growth in several economies, global spillover effects and disconnect between the financial and business cycles…,” Das said.

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