Having weathered two major shocks — the COVID-19 pandemic and the conflict in Ukraine — over the last two-and-a-half years, the RBI was confident that it could effectively deal with new challenges which may emerge on the horizon, Governor Shaktikanta Das asserted on Friday.
“So far as India is concerned, our buffers are very strong and our focus is always on maintaining financial stability and macroeconomic stability,” Mr. Das said, when asked to comment on economist Nouriel Roubini’s prediction that the U.S. and the global economy would likely enter a ‘long and ugly recession’ towards the end of this year.
“The RBI as a central bank has to maintain price and financial stability that is the uppermost objective,” he emphasised. “If you recall when the COVID-19 pandemic started, the expectations were that all countries will take massive hit. In fact, our stress test models showed that under severe stress... gross NPAs could go up to 16%. But that did not happen.”
He said throughout the pandemic and after the war started, the RBI had responded as required from time to time.
Mr. Das said liquidity in the system continued to be in surplus and henceforth only 14 days VRRR auctions would be adopted and the RBI “will continue with our two-way fine-tuning operations of injection or absorption of liquidity”.
He said amid the global currency market turmoil, the Indian rupee had been depreciating in an orderly manner.
“Our focus is on prudent intervention in the forex market and prudent management of the foreign exchange reserves.”
Stating that India’s foreign exchange reserves at $537.5 billion as on September 23 compared favourably with most peer economies, he said the ‘umbrella’ of forex reserves continued to remain strong.
India’s external sector remained sound and resilient, he asserted.
“We at the RBI have dealt with challenges in the past. The buffers continue to be strong and our priority is financial stability. The prospects for the Indian economy are strong, there is optimism and confidence,” he added.