RBI Governor Shaktikanta Das on the New Frontier for Central Banks

We need to know before entering the water how many sharks are there inside the water.

CBDC is going to be the future currency of the world and it is necessary that every central bank, every country works on CBDCs.

Yeah, I think first, good afternoon to all of you and thank you very much, Krishna, for giving me this opportunity. Thank you to you personally and to the IMF, and very happy to see you all this afternoon. Now coming to the inflation scenario in India. Yes, by and large what you say is right. I think the primary reason in the context of India was that the COVID time response of both the monetary authority, the Reserve Bank of India, and the government from the fiscal side was very calibrated and targeted. There was no excessive fiscal expansion compared to other countries. The government did enhance substantially the fiscal targets; it was widened. The government went for a higher fiscal deficit. So when I say it was not excessive fiscal support in comparison to many advanced economies, and also on the monetary side, we took very calibrated measures during that period. We provided very strong support to the financial markets with a commitment to see that they function normally. We undertook a number of measures. For example, we pumped in a lot of liquidity. We reduced the policy repo rates by 215 basis points on top of a few rate hikes we had done earlier. We also provided support to lenders, both banking companies and non-bank lenders, by first offering a moratorium of six months followed by a resolution framework for loans under stress. All these responses were very calibrated. Just to give one example, we injected liquidity, but almost every liquidity injection measure was accompanied by an end date, a sunset date. For example, when we gave liquidity, it was given for one year or three years. The lending standards, the collateral standards, were not diluted. Right from day one, the banks knew they had to return that quantum of liquidity after one year or three years, so they could plan their liquidity management better. So by and large, the monetary and fiscal response in India was very calibrated and targeted. Simultaneously, the supply side management and steps taken by the government during that period helped us bring down inflation and keep it under check. Due to a combination of all these factors, the inflation spike in India came a little later. In fact, I would even go to the extent of saying that without the war in Ukraine, our inflation would have been very much within our target range. Our inflation target, as many of you know, is 4% with a tolerance band of 2% on either side. In February 2022, when we did the monetary policy statement, our projection for the next financial year 2022-23, commencing April 2022 to March 2023, was an average inflation of 4.5%, very close to our target of 4%. But then the war commenced, commodity prices hit the roof, particularly crude oil. Access to supplies of wheat and other cereals got affected. International prices went up. India, despite being surplus in wheat, saw domestic wheat prices rise because we are linked to the international market. Edible oil prices, a substantial quantum of which India imports from Ukraine and Russia, also got disrupted. So I would say but for the unexpected onset of the war in Ukraine, our inflation would have been very much under control.