Strong fundamentals, better CAD to help offset external shocks: RBI Governor

Mumbai (Maharashtra) [India], August 5(ANI): Reserve Bank of India (RBI) Governor Sanjay Malhotra expressed strong confidence in the resilience of the Indian economy, stating that robust fundamentals and a manageable Current Account Deficit (CAD) will provide sufficient structural support to buffer external shocks such as West Asia tensions and crude volatility.
Responding to a question from ANI during the post-Monetary Policy Committee (MPC) press conference in Mumbai, Governor Malhotra emphasized that steps to expand Foreign Portfolio Investment (FPI) scope will bolster foreign inflows.
"Going forward, we have expanded the scope of various sectors for FPI--for example, insurance--that could help," he said. "We have also taken a number of measures; we are now trying to simplify the rules and regulations governing FPI around these service, scheme-like rules."
Underlining the overall strength of domestic macroeconomic indicators, Governor Malhotra reiterated that India's underlying economic position remains solid despite global volatility.
"I think the fundamentals of the economy are very strong...Even if you look at not only the capital side, despite these concerns, we have a CAD surplus... exports have improved and trade deficits have come down." Malhotra said
On recent foreign investment movements, the RBI Governor clarified that capital outflows are driven by market dynamics rather than any domestic economic flaws.
"FPI, too, is more about expectations. FPI outflows which are being witnessed, again, are not because of any underlying structural reason, but because of relative valuations," he explained.
He further added, "We expect our external position to be very good, and the measures that we have taken, I think, will also help the expectations channel to develop. We have acted proactively." He concluded by noting that "as mentioned in my statement, the results of Q1 already show good performance."
The post-MPC briefing covered diverse aspects of the Indian economy, highlighting the resilience of the agricultural sector alongside overall economic performance.
Addressing liquidity management, credit growth, and anticipated demand during upcoming festive months, the RBI reiterated its commitment to managing systemic liquidity in alignment with growth dynamics and the policy repo rate.
The central bank emphasized a data-dependent monetary policy approach prioritizing price stability, alongside discussions on foreign exchange reserves and precious metal orientation.
In key policy updates, the Governor said that plastic bank notes are currently undergoing testing and may enter the market by the start of the next financial year, with security features to be announced soon.
Additionally, expressing concern over banks artificially inflating financial statements through period-end 'window dressing,' the RBI noted that the practice yields no real benefit and directed strict adherence to regulatory guidelines. (ANI)