Reserve Bank of India Governor Urjit Patel on Friday described reforms undertaken by the government as ‘transformative’ and said these would help shape India’s economic evolution.
“The government... has to be lauded for instituting three landmark reforms,” Dr. Patel said at a convocation ceremony of the Meghnad Desai Academy of Economics. “One cannot and should not underestimate the sagacity and uncommon courage of the government to undertake reforms that can only be described as truly transformative,” he said. Dr. Patel identified the monetary policy framework, the Goods and Services Tax and the Insolvency and Bankruptcy Code as the three key reforms instituted by the government.
In 2016, the government amended the RBI Act for mandating the central bank to operate the monetary policy framework with the objective of maintaining “price stability while keeping in mind the objective of growth.”
“This was a fundamental shift in the institutional architecture for the conduct of monetary policy, with the formal transition to a flexible inflation-targeting framework and the relinquishing of the monetary policy decision by the governor to a six member monetary policy committee (MPC),” Dr. Patel said.
The Governor said another momentous reform was the establishment of the GST Council whereby the government created “one of the most effective institutional mechanisms for cooperative federalism.”
“Also, the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC) is a watershed towards improving the credit culture in our country,” he said.
He said these steps were unprecedented in the history of the nation in that they “showed the government’s commitment to sound public policy by establishing institutions” and “ceding power to them to perform functions vital for securing and entrenching macroeconomic and financial stability.”
He also said there is an ‘acute information deficit regarding the unorganised sector in India,’ despite its significant role in income and employment generation.
“The absence of official or non-official statistics has not, however, prevented economists from conducting survey-based studies to help understand its dynamics,” he said.