Economy sailing smoothly amid global headwinds: Das

PTI Mumbai: Reserve Bank Governor Shaktikanta Das on Thursday said the Indian economy has been sailing "smoothly" amid the global headwinds. Speaking at an event organised by CNBC-TV18 here, Das declined to comment on a suggestion by Union Commerce Minister Piyush Goyal for a rate cut, maintaining that the rate-setting panel will take an appropriate call on it at its next meeting in December. In comments made days after headline inflation shot up beyond the 6% tolerance band of RBI for October, Das said inflation is "expected to moderate despite periodic humps".

The Governor said the domestic economy has sailed very well through the prolonged period of turbulence in the recent past exhibiting resilience, but added that there are a slew of headwinds prevailing in the global economy right now like rising bond yields, commodity prices showing a divergence and a contradiction of financial markets showing resilience despite rising geopolitical risks. "The Indian economy is sailing smoothly, powered by buffers like strong macroeconomic fundamentals, a stable financial system, and a resilient external sector," said the bureaucrat-turned-central banker, who will be completing six years at the helm at RBI soon. With the rupee hitting new lows, Das said India's external sector has exhibited "strength and stability" in the recent period as seen in the current account deficit remaining at a manageable level, merchandise exports starting to grow, and service exports growth being strong.

He reminded that the country has the fourth largest forex reserves in the world. The forex reserves, which stood at USD 682 billion as of October 31, are sufficient to cover the entire external debt and a year's import payments, he added. The Governor also made it clear that the RBI does not target a rate for the rupee, and the fore interventions are for ensuring orderly movement and curbing volatility in the currency. "If the Indian rupee has remained relatively stable despite severe external shocks, including the largest and the steepest tightening by the US Fed in 2022 and 2023, it speaks volumes about the sea change in our macro fundamentals from the days of the taper tantrum," Das said. On the issue of regulation, he said the RBI will be issuing a draft of the Expected Credit Loss (ECL) framework and the final guidelines will come out post public comments. Without giving a timeline for the introduction of the draft guidelines, Das said the RBI had issued a discussion paper on the subject in 2023 and also constituted a working group to study the comments received on it.

Das said the RBI is taking a very "careful" approach on ECL, which is widely feared to increase the provisioning requirements for Indian lenders as they need to set aside money ahead of an asset being classified as non-performing, and also called it a "major transformation". "Now the idea is to get stakeholder comments on certain specifics of the (ECL) framework, considering its significance for the banking sector," Das said, making it clear that the RBI's endeavour is to maintain a balance between banking sector stability and economic growth. He said the final guidelines for the disclosure framework on climate-related financial risks will also be issued shortly.