Benign fiscal stance will stay, says RBI
Balancing and sequencing the exit need to be addressed, says Subir Gokarn
India would have to carefully exit from its more than a year long accommodative monetary stance, though economic recovery is on course, one of the Reserve Bank of India (RBI) deputy governors said on Tuesday.
“Exit is clearly going to have to be done very strategically, very carefully,” the newly-appointed RBI Deputy Governor Subir Gokarn said. “How we balance it, how we sequence it, I think, are challenges we have to address. But even as we do that, the risks of destabilising or upsetting the applecart... those risks are high. You cannot underestimate that,” he added.
Pointing out that the economic outlook was better than a year ago he said “The situation, in terms of economic outlook, compared to a year ago, is far more comfortable and it gives policymakers little bit of breathing space in terms of being able to come back to normal set of considerations,” he said.
“We are on our course of recovery, but it is still a situation fraught with threats. Some of these threats could be domestic, some could be external. We have to maintain a balance. We cannot ignore external circumstances,” he added.
The economic recovery is still sluggish, not very broad-based and abnormally dependant on a few sectors, Gokarn said, adding that “The objective is to keep the recovery intact, is to make sure that the drivers of the recovery, whether they are coming from consumption, investments or exports, are not seriously disrupted from the process of the exit.”
