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Mumbai: Lauding the Reserve Bank of India (RBI) for its astute management of the country’s financial system at an event on Monday to mark the central bank’s 90th anniversary, Prime Minister Narendra Modi laid out a roadmap for the next 10 years, saying India would need to become economically self-reliant to shield itself from external shocks.
Making the rupee more internationally accepted, increasing the reach of banking services and scaling up digital transactions would be key focus areas, Modi said. “Today, India contributes 15% to global growth and is a growth engine, and there should be an attempt that our currency becomes more accessible and acceptable across the world.”
In December 2021, RBI had formed an expert panel to generate incentives for using rupee in trade and financial transactions, invoicing and denomination, among others. The panel’s report was made public in July 2023, laying the roadmap towards internationalizing the rupee. Earlier, in July 2022, RBI had announced an arrangement for domestic traders to settle imports and exports in rupees.
Highlighting how India has remained resilient even in the face of external challenges, Modi said even as some large nations are trying to recuperate from shocks, the Indian economy is touching record heights. RBI’s ‘State of the Economy’ reports have been pointing out how India remains a “bright spot” amid global uncertainties. In its latest edition, the report said the global economy is losing steam, with real gross domestic product (GDP) growth slowing in some of the most resilient economies.
The prime minister unveiled a special coin on the occasion of RBI’s 90th anniversary, in the presence of finance minister Nirmala Sitharaman, RBI governor Shaktikanta Das, and several other ministers and industry leaders.
In his opening address, Das said global turmoil from the covid-19 pandemic and geopolitical hostilities have tested the resilience of every economy in the world, including India. However, the “well-calibrated and coordinated” monetary and fiscal policies in India went a long way in shielding the economy from these shocks, he said. “It is a matter of satisfaction that today our GDP growth is robust, inflation is moderating, the financial sector is stable, the external sector remains resilient, and forex reserves are at an all-time high,” said Das.
“You all know that our GDP, to a great extent, is dependent on the coordination between monetary and fiscal policies,” said Modi, reminding the audience how the health of the banking sector was 10 years ago. “I remember when I attended the 80th anniversary of RBI in 2014, things were quite different. The entire Indian banking sector was riddled with challenges, and everyone was concerned about the bad loan numbers, stability of the banking system and its future.”
Modi pointed out that gross bad loans of banks have declined between 2018 and 2023, and the twin balance-sheet problem—where bank balance sheets were stressed from bad loans and corporate balance sheets were overleveraged—is a thing of the past. “Bank credit growth has touched 15% and RBI has played a major role in all of these positive changes,” said Modi.
The prime minister also said that one needs clarity on the goals for the next 10 years, including expanding the ambit of digital transactions while keeping a close watch on the changes owing to the economy turning cashless. “We need to improve financial inclusion efforts,” he said.
While saying that the banking needs of India’s large population can be different as some prefer physical banking whereas others want digital, India needs policies to improve ease of banking and to ensure everyone can access credit.
Modi said the financial policies before the National Democratic Alliance government first came to power in 2014 did not reflect the intention to deal with double-digit inflation. “To manage this, our government introduced the inflation targeting framework for RBI. The MPC (monetary policy committee) has done good work on this mandate and the government also took measures like active price monitoring and fiscal consolidation,” he said.
Monday’s event saw industry heavyweights Reliance Industries CMD Mukesh Ambani, Mahindra Group chairman Anand Mahindra, Kotak Mahindra Bank’a Uday Kotak, and former HDFC Ltd chairman Deepak Parekh, present.
Also present were Maharashtra governor Ramesh Bains; chief minister Eknath Shinde and deputy chief ministers Devendra Fadanvis and Ajit Pawar; and Bhagwat Kishanrao Karad and Pankaj Chaudhary, the central ministers of state for finance.
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