We have started seeing the upturn in economic growth: Urjit Patel
BALANCING ACT ‘We don’t lose sight of growth within the Monetary Policy Committee, but not at the cost of inflation’
jections based on high frequency real economy indicators suggest, that growth will pick up in the third and fourth quarters (of the current fiscal year) to above 7%. Our fullyear estimates are in the line with OECD’S (Organisation for Economic Cooperation and Development) most recent estimate of India’s growth but lower than that of the Asian Development Bank (7%).
We have started seeing the upturn. The Nikkei India Services PMI Business Activity Index rose more than 3 percentage points in September over August; the core sector
IIP (index of industrial produc- tion) saw a 4.9% rise in August. If you look at some of the highfrequency data such as automobile and two-wheeler sales, you also see the upturn there. There has been excess liquidity for a variety of well-known reasons, but the liquidity overhang is tapering off. Our objective is to keep the weighted average call money rate as close to the repo rate as possible. With the decline in liquidity in the system, the weighted average call rate which, on an average, traded below the repo rate by 18 basis points during July has, subsequently, risen by 5 basis points in September. (One basis point is 0.01%) Even during the most challenging times regarding liquidity over the past 12 months, the broad integrity of the monetary stance was maintained by RBI. We have an excellent MPC. Out of six members, we have three external members. They are respected as researchers. They have notable academic backgrounds; teach at top institutions in our country; and have thought about Indian macroeconomics for most of their professional lives.
The FOMC (Federal Open Market Committee, the policy making body of the US Federal Reserve) does not have outsiders. Yes, they have people from markets but they are from the Fed system itself. We have the requisite expertise within RBI.
You must appreciate that the current government, the strongest one in about three decades by virtue of a clear majority in Parliament, has actually ceded powers by constituting an MPC with external members, and the GST Council where the Centre is not in the majority. These are two important new institutions – one in the monetary policy space and, the other in the fiscal space. Can we ask for more?