RBI Governor Highlights Improved Coordination In Economic Management

New Delhi, Sep 25 (KNN) Reserve Bank of India (RBI) Governor Shaktikanta Das has emphasised the positive impact of enhanced coordination between the central bank and the government in managing the trade-off between inflation control and economic growth.

Speaking at the First Himalaya Shumsher Memorial Lecture at Nepal Rastra Bank in Kathmandu on Tuesday, Das outlined how the pandemic experience has demonstrated the efficacy of synchronised monetary and fiscal policies in achieving better economic outcomes.

"During the pandemic, central banks collaborated closely with governments to address the unprecedented crisis," Das stated. 

He explained, "Subsequently, as central banks tackled multi-decade high inflation, governments implemented supply-side measures to alleviate inflationary pressures.” 

“This coordinated approach minimised the output sacrifice required to reduce inflation," das further added.

The RBI has consistently maintained that low inflation is crucial for sustainable long-term growth. 

However, the bank acknowledges that its monetary actions to curb inflation can have immediate impacts on growth through demand suppression.

Das noted a shift in central banking models over the past decade. While previously focused solely on price stability, central banks now operate under a broader mandate that encompasses sustained growth and financial stability alongside price control.

To illustrate this coordination, Das pointed out that the RBI injected over Rs 5.5 lakh crore of liquidity to mitigate lockdown-induced stress on businesses. 

Later, when the RBI raised interest rates in 2022 to combat inflation, the government complemented these efforts with measures to stabilise commodity prices.

The governor's remarks underscore the evolving nature of economic management in India, highlighting the importance of a holistic approach to addressing complex economic challenges in the post-pandemic era.

(KNN Bureau)