Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday emphasised the critical role of fiscal-monetary coordination in navigating India through a series of external economic shocks.
Highlighting the collaborative efforts that contributed to India’s economic resilience, he said, “Effective fiscal-monetary coordination was at the core of India’s success in the face of a series of adverse shocks. From this perspective, macroeconomic stability becomes a shared responsibility of both monetary and fiscal authorities.”
The Governor was speaking at the High-Level Policy Conference of Central Banks from the Global South in Mumbai.
On inflation he said, stable inflation is the bedrock for sustained growth as it enhances the purchasing power of the people and provides a stable environment for investment.
“It acts as a bedrock for sustained growth, enhances the purchasing power of the people and provides a stable environment for investment,” Das said.
He emphasised that price stability is just as crucial as growth to enable economic agents to plan ahead, reduce uncertainty and inflation risk premium, encourage savings and investment, all of which provide a boost to the potential growth rate of an economy.
“Thus, in the long run, price stability supports sustained high growth. Price stability is also important because high inflation is disproportionately burdensome on the poor,” Das said.
He acknowledged that demand-pull pressures were eased due to effective supply management by the government, which alleviated supply chain disruptions and moderated cost-push inflation. These efforts played a pivotal role in maintaining price stability in India while supporting growth.
Governor Das said they had significantly transformed India’s economic framework. He highlighted the introduction of the Flexible Inflation Targeting Framework, the implementation of the Goods and Services Tax (GST), and the enactment of the Insolvency and Bankruptcy Code (IBC) as key milestones.
“Implementation of the nationwide Goods and Services Tax, and enactment of the Insolvency and Bankruptcy Code, brought about a paradigm shift in the Indian economy and helped in raising the medium and long-term growth potential of India,” he said.
These reforms, according to the Governor, brought about a “paradigm shift” to the country’s economy, enhancing India’s medium- and long-term growth potential.