'Monetary policy has limits; structural reforms, fiscal measures required,' says Shaktikanta Das

Budget 2020: RBI Governor Shaktikanta Das said that one of the major challenges for the central banks is the assessment of the current economic situation

Budget 2020: Shatikanta Das says structural reforms required Budget 2020: Shatikanta Das says structural reforms required

Budget 2020: Reserve Bank of India Governor Shaktikanta Das said on Friday that monetary policy has its limitations and called for structural reforms and fiscal measures to boost growth. "Monetary policy has its own limits. Structural reforms and fiscal measures may have to be continued and further activated to provide a durable push to demand and boost growth," Das said at an event at his alma mater St Stephen's College in Delhi.

The governor identified few avenues including food processing industries, tourism, e-commerce, and start-ups that could push growth at the event held a week ahead of Budget 2020.

"One of the major challenges for central banks is the assessment of the current economic situation. The precise estimation of key parameters such as potential output and output gaps on a real time basis is a challenging task, although they are crucial for the conduct of monetary policy," he said, as mentioned in a report in Times of India.

The RBI governor also said that states should also play an important role by enhancing capital expenditure that has high multiplier effect. He pointed out that the government is focussing on infrastructure spending.

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"The shifting trend growth in several economies, global spillover effects and disconnect between the financial cycles and business cycles in the face of supply shocks broadly explain why monetary policy around the world is in a state of flux," said Das. The RBI Governor said that the apex bank was constantly updating its assessment of the economy.   

He added that there is a focus on financial inclusion and on promoting secured, seamless and real-time payments and settlements. "This renewed focus on financial inclusion and secured payments and settlements are not only aimed at promoting the confidence of the general public in the domestic financial system but also improving the credibility of monetary policy for price stability, inclusive growth and financial stability," he added.

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