 "Reserve Bank of India Governor Shaktikanta Das")
The Reserve Bank of India Governor Shaktikanta Das said that the results of pilot projects for promoting Central Bank Digital Currency (CBDC) have been highly promising. The governor said that CBDC can play an important role in cross-border payments without much difficulty.
"It has been almost a year since our CBDC pilot project commenced. The insights gained during this period have exceeded our expectations. We are now more convinced than ever that CBDC can serve as the most effective and efficient method for cross-border payments, especially for international transactions," said Das during the Governor's Series Talk at Frontiers of Central Banking in Asia in Marrakech on 13 October.
Furthermore, Das said that the ongoing conflict in Ukraine has significantly influenced the central bank's recent strategies in combating inflation.
"In fact, without the war in Ukraine, our inflation would have been very much within our target range. In February 2022 when we did the monetary policy statement, our projection of inflation (average) for the next financial year 2022-23, i.e., from April 2022 to March 2023, was 4.5 per cent, very close to our target of 4 per cent. But then the war commenced," he said.
Das said that India could control inflation better because of the calibrated and targeted measures taken by both fiscal and monetary authorities.
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The governor further said that it was a conscious decision to build up the reserves buffer as an insurance against spillover risks. The foreign exchange reserves have risen by 70 to 80 per cent since 2019.
He said that India's reserves proved invaluable during the Ukraine war, especially when the US dollar unexpectedly surged, causing depreciation in all emerging market currencies.
In terms of currency market intervention, he said that the central bank doesn't intend to fix the rupee at a particular level.
"I will not hesitate to say for a moment that we do intervene in the market, but our intervention is both ways. Sometimes, we buy dollars, sometimes we sell dollars, it depends on which way the market is moving. But our objective is not to fix the rupee at a particular level," said Das.
He said that the primary focus lies in curbing excessive volatility in the exchange rate. Achieving stability in currency allows for a controlled depreciation or appreciation, aligning with market trends. The movement of the currency must be orderly, void of any undue fluctuations, ensuring stability in the financial market.
"This is one area where it is necessary for agencies and others who do labelling of market intervention. It is time to rethink, to put somebody on the watch list or to call the country a manipulator or to call the country's currency a stabilised currency. There is a need for rethinking and there has to be a two-sided appreciation of the challenges," he said.
