The recent decision of the Reserve Bank of India (RBI) to inject rupee liquidity through long-term foreign exchange swap — a first of its kind in liquidity management policy — has been received well, Reserve Bank of India Governor Shaktikanta Das said on Tuesday.
Mr. Das was speaking to reporters on the sidelines of an event to launch former governor Y.V. Reddy’s book.
When asked what kind of feedback the central bank had received on the new instrument, he said, “26th [March] is the auction, so we will receive the feedback on 26th. But by and large, I think it has been received quite well.”
The central bank will conduct a dollar-rupee buy/sell swap auction of $5 billion for a three-year tenor, on March 26.
“So far as the intentions behind the schemes are concerned, whatever we said in the press release that day covers the relevant point,” he added.
When asked if the tool to inject liquidity would be repeated, Mr. Das said, “I cannot say at this moment.”
Earlier, the RBI Governor said there was a need to give permanent status to the finance commission.
Broad consistency
Observing that there was a need to ensure broad consistency between finance commissions so that there was some degree of certainty in the flow of funds, especially to States, he said, “This has become even more critical in the post-GST scenario. In other words, there has to be continuity and change between finance commissions. Increasingly, therefore, it is felt that there is a need to give permanent status to the finance commission.”
He, however, clarified that his views did not represent the views of the 15th Finance Commission in which he was a member for more than a year.
Stating that the recent initiatives in fostering cooperative federalism had opened new chapters of cooperation between the Centre and States, he added that cooperative federalism, however, should not ‘breed inertia’.
“Alongside cooperative federalism, there has to be competitive federalism. The ranking of States on the parameter of ‘ease of doing business’ has generated a very healthy competition among States.
Indices developed by the NITI Aayog on health, water management, implementation of SDGs, etc., have the potential to generate similar healthy competition,” the RBI Governor added.
Mr. Das also stressed on fiscal consolidation, both at the Central and State levels, and said it was important for robust expenditure planning.
“There is now a general agreement in the country about the importance of fiscal consolidation roadmap both at the national and sub-national levels. While adhering to fiscal deficit targets and debt to GDP ratios, it is equally important to undertake robust expenditure planning based on a ‘commonly agreed expenditure code’ to address the socio-economic challenges without diluting the goals of fiscal consolidation,” he said.
