While measuring inflation rate, it is important to take into account the rising prices of food items: Full interview of RBI Governor Shaktikanta Das

New Delhi:

Reserve Bank of India (RBI) Governor Shaktikanta Das says that the common man should understand the RBI and its work. In an exclusive interview with NDTV Editor-in-Chief Sanjay Pugalia, Shaktikanta Das spoke in detail on various issues including the Indian economy, inflation rate, GDP growth rate, use of AI in the banking system and cyber security.

During the interview, the RBI governor also explained how RBI and India came out of the global crisis that followed Covid. Shaktikanta Das also clarified that the inflation rate falling below 4% once or twice cannot become the basis for reducing the key interest rates.

Read the full interview of RBI Governor Shaktikanta Das:-

RBI is a part of everyone’s life, but the common man does not understand much about RBI. During your tenure, the language of RBI has been such that the common man understands it. Now everyone knows and understands a lot about RBI and its working. What would you say on this?
This year we are celebrating the 90th year of RBI. It has always been our endeavor to explain to the common man in the simplest way possible. We are working in the same way. Earlier people did not understand much about RBI. However, everyone is affected by RBI and its policies. So, our endeavor has been to explain about RBI to the common man.

It’s been 6 years since COVID. The global crisis is still going on. India was shining brightly in this whole story. RBI’s role has been important behind that. How did you navigate this period?
This is a very long story. To put it briefly, India dealt with all the situations very well, be it the Covid crisis and the challenges that came after it, like the Ukraine war or the tightening of global synchronized monetary policies, raising interest rates across the world or the turmoil in the financial markets. Covid started in March 2020. The second wave came in April 2021. The Ukraine crisis started in 2022, the consequences of which were visible far and wide. All these were geo-political crises as well as geo-economic crises. Because trade restrictions had started coming. The contribution of the countrymen in dealing with this crisis was commendable. Along with this, coordination between the government and the RBI was also involved. This coordination is called Fiscal Monetary Co-ordinated Approach. This proved to be very helpful.

The last five years have been very turbulent. After Covid, there was a period of output loss across the world. The crisis is still going on, but India has come out of it in a much better way. The way we have come out of the crisis is very important. Our economy and financial sector have emerged stronger after this. The annual average GDP growth has been more than 8% in the last three years. This year’s projection is also 7.2%. After the Ukraine war, inflation had reached 7.2%, which is now 3.5%, but it is around the target. India’s growth momentum is strong. The finance sector, including banking and NBFC, is much more stable than five years ago.

EXCLUSIVE: “RBI is also focusing on AI…”, RBI chief Shaktikanta Das told NDTV

What measures will you take to bring inflation down to 4% permanently? What conditions are you keeping an eye on to reduce key interest rates without affecting growth?
First of all, I would like to tell you that we never said that we have an inflation target of below 4%. Yes, our target is to keep it around 4% permanently. It has never been our idea to reduce interest rates if it goes below 4% once or twice, because that would be a very big policy mistake. We have to be patient. There is a long way to go. As far as growth is concerned, our growth sacrifice has been very minimal. In fact, it has been almost negligible. This year the projection is 7.2% and India will remain the fastest growing economy in 2024-25. Food inflation will remain very important, because until it does not reduce, the public will have to spend more on food and drink. Inflation figures will keep confusing them. Therefore, keeping food inflation in mind, the change in rates will depend on future figures.

There is a positive atmosphere in the country, people are also confident of achieving big goals. The goal is to develop India by 2047, even if we are not able to become a rich country by then, we must become a high-middle income country. What are the challenges for that?
The work agenda is important, which will always have to be given attention. First of all, we will have to focus on price stability, inflation will have to be kept around 4 percent. Due to price stability, consumers get confidence, their purchasing power increases. Investor confidence also increases with it. Second thing is – financial stability will have to be ensured. Stability of banks, NBFCs, the entire financial sector is very important. Apart from this, we have taken many corrective steps in the last few years. Government schemes like ‘Make in India’ have also helped a lot. Output in the agriculture sector should be increased. The presence of India’s service sector is being felt in the global market. Exports in the manufacturing sector can be improved.

Let’s talk about the stability of banking. Deposit growth is slow, credit growth is high. Indian youth have started focusing on investing instead of saving. Although this is a symbol of confidence in the economy, but how much should one worry about this?
Attention has been paid to the governance standards of banks and NBFCs. A lot of improvement has been seen in these in the last few years. In the internet age, the youth are ambitious. They look towards other markets. Their investing in different places is a good thing, but we ask the banks to keep an eye on it, because the difference in deposit and credit growth can become a problem in the long run. This can cause liquidity problems. Banks will have to work on this. Balance has to be brought in deposit and credit growth. Banks have also taken steps for this. Many banks have come up with infrastructure bonds. Banks should launch new products related to deposits. Banks should use their branch network so that deposits increase.

EXCLUSIVE: “RBI is also focusing on AI…”, RBI chief Shaktikanta Das told NDTV

Earlier, banks were spared by imposing a small fine for violating any rule, but now they are being punished. How do you explain this?
It is not like that. This is not a punishment, but corrective steps. Banking has improved a lot due to our supervision. Overall, the banking sector is stable. Wherever we see shortcomings, we inform the bank. We give them time to improve. We ask them for a roadmap and then want to implement it. If it does not happen, then after the given time, we take corrective steps, because by then the consumer suffers the most. Anyway, the bank will also benefit from these steps.

Compared to earlier times, every work now takes less time. After digital intervention, it is possible to keep real-time monitoring. What options does RBI have in terms of supervision?
Technology has helped a lot. The world situation is very dynamic. Changes come very fast. We too will have to keep pace with it. We can never say that we have reached a certain point, because changes keep happening. There is continuous progress. We have now started using AI as well, our focus is on that. This is a continuous process. We will have to keep doing it continuously. We will have to keep evaluating ourselves continuously. This is a challenge for all of us.

RBI has a wealth of information and data. You should also develop a Global Capability Centre?
Many countries are progressing. Central banks of all are progressing. RBI’s focus is on the country’s economic stability. It is on the country’s monetary stability. We are not a profit-making organization. We do not prepare a profit and loss account. When we transfer to the government, it is called surplus transfer. It is a public institution.

RBI is acting as a strict guardian for fintech. Tell us about this?
I want to make it clear that the serious fintech players understand RBI’s approach. Our interaction with them is very good. Four years ago, we had also formed a dedicated fintech department. Any fintech player can meet them anytime, where they can understand anything. They can tell their problems. We also meet regularly with fintech associations. Fintech players have the full support of RBI. But they too will have to follow the rules when they enter the regulated space, otherwise RBI will immediately intervene if it sees any danger.

EXCLUSIVE: “Deal well with the challenges after COVID…”, RBI chief Shaktikanta Das told NDTV

UPI is a huge achievement, so is RBI doing anything to expand it at the global level?
Bilateral agreements have been made with many countries for UPI. Work is being done in collaboration with ASEAN countries, which has been named ‘Project Nexus’. We are expanding UPI globally.

I want to talk about two risk factors. What are you doing about the threat of cyber fraud, hacking and attack on India’s progress?
As far as cyber security is concerned, it is a big threat. There are frauds in mobile banking, for which we are constantly spreading awareness through advertisements. We are creating a public repository about all types of legitimate apps, by going to which you can know whether the message you have received is from a legitimate place or not. We also keep interacting with banks and NBFCs, whose main focus is cyber security. We had alerted the banks even during Covid. Everyone works together for security.

Your two tenures were extremely challenging, yet RBI received the Best Central Bank award. Despite this, some work may have remained unfinished, so what are those tasks that should be done next?
We are celebrating the 90th year, and we have made an agenda – RBI at 100. It has a list of what needs to be done in the next 10 years in many sectors. It has a complete list of what needs to be achieved by 2034, and the focus is on that. Our goal is to keep RBI ‘future ready’. As for the Best Central Bank Award, it is the result of team effort. No captain can win a match alone. I not only congratulate the entire RBI team, but also congratulate the banks and other institutions who worked together.

EXCLUSIVE: “Economic growth was not sacrificed, India is still the fastest growing economy…”, RBI chief Shaktikanta Das told NDTV