Need to avoid inflation, NPA traps, says RBI Guv

Tribune News Service

New Delhi, April 27

“The mantra of coming out of the ‘chakravyuh’ has also to be thought out very carefully and factored in when entering the ‘chakravyuh’,” he said.

“Whether it relates to fiscal deficit or liquidity or any other extraordinary measure, it has to be applied in time, and the exit also has to be made in time,” Das added in his first interview over a month after the country entered into a lockdown.

Arguing for a time frame to withdraw the accommodation offered to the industry in the form of easy liquidity and debt moratoriums, he said it did not mean that this should be done quickly.

To ensure the markets didn’t think the RBI was going into a tightening mode in near future, he emphasised the withdrawals would be made when things were working and near normal.

The RBI chief was, however, noncommittal on whether the government would print money to make up for the shortfall in GST collection and direct taxes but was sure that the upper limit of fiscal deficit was certain to be breached.

Several former RBI Governors have suggested that to raise resources, the RBI should print money, which, they feel, will not lead to inflationary pressure in the current situation.

The RBI chief said though some foreign investors were influenced by rating agencies, by and large they had exhibited trust in the macro-fundamentals of Indian economy, irrespective of rating upgrade or downgrade.