Economy
RBI Governor Shaktikanta Das
In his second round of monetary and regulatory measures intended to alleviate the financial stress caused by the Covid-19 pandemic, Reserve Bank of India (RBI) Governor Shaktikanta Das used Mario Draghi’s famous phrase of 2012: “whatever it takes”. The former president of the European Central Bank (ECB) said at a meeting in London eight years ago that the bank would do “whatever it takes to preserve the euro”.
Since then, many central bankers and government heads have used the same phrase, and today (17 April) Shaktikanta Das did the same. Doing “whatever it takes” means reducing rates whenever needed, easing regulatory measures to enable repayments moratoriums to stressed sectors, and providing liquidity till it hurts.
The RBI’s whisper to banks on 27 March, to go out and lend, came with a push and a louder message: don’t let your money remain idle. Lend till it hurts.
The key measures announced by Das in a televised address included the following:
The Governor also announced that inflation was on a downward trajectory, and that he expected to see a further downtrend in the coming months.
This is unusual, for assessments and forward-looking statements on inflation and rates are in the remit of the Monetary Policy Committee (MPC). The Governor paid routine obeisance to the MPC, but made his statement on the inflation trajectory anyway.
Given the massive economic crisis precipitated by the pandemic, the RBI has already taken charge of interest rates, by cutting the fixed reverse repo rate without the MPC recommending it, and by reducing cash reserve ratio (CRR) on 27 March.
The MPC is practically irrelevant now. Leadership in monetary policy is now being taken by the RBI Governor.
Governor Das has proved that ultimately it is the central bank that has all the necessary weaponry to deal with a crisis, “whatever it takes”. The MPC is now a mere talk shop. It does not have “what it takes” to deal with crises.
It’s comforting to know the Governor Das is now in charge, and not the bumbling MPC.
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