India At Davos: #RBI Governor #ShaktikantaDas speaks at World Economic Forum 2024. #WEF #NDTVProfitLive
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00:00 confidence on India, on the Indian growth story, on the technology story built around India and on the growth prospects of India,
00:10 the stability that is the macroeconomic and financial sector stability that India offers.
00:16 So my message, if you see it in that sense, is that I think we need to really sort of step back and look at the business
00:29 opportunities in India because this is the really right time to get into the Indian business ecosystem.
00:39 Coming back to my point in terms of the India growth story, how do you see India's growth with global inflation also rising?
00:47 How do you see that panning out in the next five years, ten years? As a matter of fact, is India a futurist?
00:55 This is the future prospects of India's growth are very robust. Just imagine last three years including the current year,
01:04 what about India's growth rate? After the contraction that we witnessed, about 5.8% contraction which we saw in 2021,
01:14 the next three years growth was 9.1%, 7.2% and current year expected is 7.3%. In fact, last year in October,
01:28 contrary to our projection of 6.5% growth which we had given in the previous monetary policy,
01:35 wherein I said that I expect and I will not be surprised if the current year growth is 7%.
01:42 There is a lot of cynicism around that you know how RBI is, perhaps RBI was being over optimistic at that time in the end of October or early November
01:53 when we talked about when I said 7%. But subsequently the National Statistical Office has come out with a figure of 7.3%.
02:02 Growth prospects are very good because I think thanks to the structural reforms which have been undertaken in the recent years,
02:11 structural reforms in matters of taxation, in matters of banking, in matters of let us say giving a new fillip to the manufacturing sector,
02:20 particularly in making a vast difference in the ease of doing business in India.
02:29 So considering the structural reforms which have been done and the macroeconomic and the financial stability
02:37 which we as a central bank have been able to provide during the years of multiple overlapping shocks, crisis, unprecedented,
02:47 you know you had a health crisis, COVID, then you had a geopolitical crisis, Ukraine war, then war is still continuing,
02:54 new flashpoints in the global geopolitics are coming up, despite that the Indian banking sector has made a remarkable recovery
03:03 and I think the Indian banking sector is perhaps at one of its best in recent years.
03:09 The financial sector is very stable, the external sector is also stable, notwithstanding that the global growth is slowing down,
03:19 India's services sectors are doing well and these are not one-off developments, these are not temporary developments which are happening
03:27 because of the structural reform measures that we have. For example, look at the regulatory architecture of the financial sector.
03:35 We have given a lot of custody as a Reserve Bank of India and the Central Bank.
03:40 The entire governance system in the banks is today completely, you know the new financial architecture we have put in place
03:48 with regard to governance of both private and public sector banks.
03:52 The regulatory architecture around the NBFC, that is the non-bank finance companies,
03:57 the regulatory architecture around the digital lending, we issued digital lending guidelines.
04:02 So I think all these are the building blocks and they are providing the required foundations for the belief in the fact that
04:12 India's growth momentum will be maintained in the future years and when I say that I see durable signs of India's growth momentum,
04:21 it is not a one-off comment, it is based on a lot of in-house research and analysis.
04:28 That was a comprehensive answer. In fact, sir, as you mentioned in your answer itself, I will pick up on that.
04:34 We live in a very volatile, uncertain, very complex and ambiguous world.
04:38 What are the primary risks that you as an RBI, as an institution rather, are you overseeing on a very critical lens?
04:47 From a very critical lens, what are the kind of risks that right now you are foreseeing that will play out and might impact India's growth momentum?
04:54 This is from the external side. I mean the headwinds emanating from the external sector, that is from outside the country,
05:01 the geopolitics, the geoeconomic fragmentation, their impact on the global supply chains, which have not yet normalized.
05:11 And as I just mentioned a little while ago, that new flashpoints in global geopolitics are coming up and putting further restrictions on the supply chains.
05:20 There are new restrictions being put by many countries, by some countries, let me say it this way, on flow of capital, on flow of technology and on flow of goods and services.
05:33 So therefore, this geoeconomic fragmentation, what shape it will take again, is linked to the emerging geopolitical scenario.
05:43 Then the financial conditions which we see in the advanced countries, notwithstanding the fact that this time around the global economy,
05:55 one year ago or two years ago, everybody thought that there will be a hard landing in all the advanced economies. It has not happened.
06:03 Countries this time have responded to the challenges and far better. So hard landing is looking unlikely at this point of time.
06:12 Individual economies have done and responded far better to the global crisis. But the point remains that the global growth is slowing down.
06:20 So therefore, from the external side, the geopolitical dynamics, how it is likely to play out, the slowing global growth,
06:29 which will have impact on external demand for every country and the geoeconomic fragmentation and supply chain issues are still persisting.
06:40 That is from the external sector and the financial conditions, how they will evolve.
06:45 Internally, so far as the financial sector and the microeconomic scenario is concerned, we are very proactive in dealing with them.
06:56 Today we supervise the entire financial sector, whether it is banks or non-banking finance companies or various segments of the financial sector,
07:07 which is regulated by us, other than capital markets and the insurance sector. The rest of it is practically in the domain of the Reserve Bank.
07:15 So we are monitoring it very, you know, we have really substantially improved our supervision.
07:20 I am not going into what improvements we have brought along. It is already in the public domain.
07:25 And last week I have spoken about it and things. So I am not going into that.
07:28 But today, our emphasis and our focus of our supervision and our forward-looking approach is to identify a crisis,
07:39 identify a risk, identify a possible risk before it actually materializes and then take effective measures to prevent any risk build-up.
07:50 There are examples of it, but I mean, because of time and the media, I mean, I absolutely support it.
07:56 So therefore, internally there will be a problem, but internally, let me mention, one area about which we are, you know,
08:02 which is always on top of our agenda at the moment is the dynamics of the food inflation,
08:08 which is subject to, again, global supply chain issues and also which is linked to unexpected weather events.
08:16 So food inflation can be very volatile depending on some weather events.
08:21 We saw it last year. There were heavy rains and floods and then we had the vegetable prices going up and that impacted the headline inflation.
08:30 So that is something which is not under our control, but we have to respond to it.
08:34 So that is a matter which is on top of our table whenever we try to sort of analyze the situation.
08:41 As far as, you know, I take a different angle, in Davos, one of the line of thinking or rather the buzz is around emerging technologies.
08:49 And you being from, you know, you are heading an institution that is looking at the financial sector in India.
08:53 So what is the future of cryptocurrency in India? Very bad.
08:58 It is quite clear as a guess.
09:01 No, in the sense, let me, on a serious note, let me say, I have said it time and again, of course,
09:07 I will not shift the policies for all time stoker, but as far as I can see in the foreseeable future,
09:14 the way cryptocurrency is evolving all over the world, it has huge risks.
09:20 I think some people are celebrating it as the party has just begun.
09:25 It began four or five years ago. Then it collapsed. Now again, the party has started.
09:32 But there are huge risks, particularly for emerging market economics, for developing economics,
09:38 because it can impact your financial stability. It can impact your currency stability and monetary system.
09:47 It has issues of money laundering and, you know, this money laundering, dollar financing and all that.
09:53 And it has the potential of, you know, it's a currency like product. I have talked about it at length.
10:00 So it is a currency like product. So there are huge risks around it.
10:05 There is no underlying, if it is, it's not a currency, first of all, but it has the potential to become a currency,
10:13 in which event it can occupy a part of the, you know, your payment system.
10:18 People say that it is too far fetched, but please take my words. It can happen.
10:23 It can happen sooner than people are expecting. And, you know, the, and also the, you know, the,
10:32 it can impact your banking system. So therefore, there are various risks built around it.
10:38 It has no underlying. Every asset, if you call it as an asset, every asset has a corresponding liability.
10:45 Cryptocurrency, whose liability it is, nobody knows. But having said that, let me say that the underlying technology,
10:52 the underlying technology, blockchain, has many applications. They have, they can be put to excellent use.
11:00 And already it is being used. Already it is being used in the, you know, logistics companies, in the financial sector,
11:07 our CBDC, the Central Bank Digital Currency, the eRuby, which we have launched.
11:11 In fact, in the just two, you know, two launches further down, you have the CBDC,
11:18 Central Bank Digital Currency launched by the Reserve Bank on a pilot, as a pilot at the moment.
11:23 It's on display, it's on a demonstration along with the UPI. So we are using blockchain.
11:29 So blockchain technology has got a lot of applications. The technology needs to be capitalized.
11:34 The application built around technology is, you know, has got a lot of potential.
11:39 And that needs to be capitalized. And that needs to be utilized.
11:44 But cryptocurrency as a product is highly speculative. And my opinion is that,
11:51 and the Reserve Bank's opinion is that, considering the big risks around it,
11:56 I think countries like India should be very, very careful.
12:00 I said it in one event in Mumbai last week, that we should not have a situation like the tulip mania.
12:08 We should not again have something called, you know, crypto mania,
12:13 creating the kind of crisis that the tulip crisis did today. So I'll stop there.
12:19 I'll pick on the word UPI that you just mentioned. So UPI is something that has revolutionized,
12:25 you know, digital payment system, the ecosystem in India.
12:29 And it's something that the Prime Minister has offered towards the global South.
12:33 The kind of record transactions India has seen is more than US and China put together.
12:38 So what is the RBI doing in terms of promoting its adoption externally?
12:43 You see, UPI has been actually a game changer.
12:47 It has now become the international, kind of an international model.
12:52 And there is a lot of interest from many countries.
12:55 We have signed MOUs with several countries. And I cannot mention their names.
13:02 But we have signed, you know, MOUs with several countries to, you know,
13:08 to sort of facilitate setting up of similar systems in their countries.
13:12 Some countries we are also providing the required assistance to develop their own internal,
13:18 you know, UPI-like fast payment systems.
13:21 And the idea is to sort of link up the fast payment system of India
13:27 with the fast payment system of other countries.
13:29 We have done it in the case of Singapore. The UPI of India and the PayNow of Singapore,
13:35 it's now linked. It's now, you know, it's now linked on.
13:38 So the transactions between the, you know, across the two countries can happen on a real-time basis.
13:44 And similar exercise is already underway with many other countries.
13:49 And it can be a game changer because cross-border payments can become that much more easier,
13:57 cost-effective and faster. So therefore, that is our endeavor.
14:03 And after discussion with NPCI, the NPCI has set up a subsidiary which is specifically dedicated
14:10 to take UPI international. It's called the NPCI International Limited.
14:15 So that company is specifically focusing on taking UPI international.
14:21 So there is a lot of enthusiasm built around UPI.
14:25 In fact, some of the use cases, those who have traveled in India or those who are from India, you know.
14:31 Today, if you go to a small shop or a visitable vendor or a roadside chaiwala,
14:36 that is a tea stall or something like that, they are all on UPI because it is so much easier.
14:42 And everybody has a QR code. And the two things which we have done in India is that
14:49 we have made it interoperable across banks, irrespective of which bank you have your account.
14:56 And to the person or the merchant to whom you are making payment, in which bank he has a bank account.
15:03 There would be different banks, but it is interoperable across banks.
15:08 So UPI has got complete interoperability within the financial system in India.
15:14 That is the best use case that we have. And many new products also which we are launching from time to time.
15:23 When you travel to India, you know, UPI One World product can be used.
15:29 You can sort of create a UPI wallet and paying in dollars or pounds or whatever currency you have
15:36 and create that wallet, spend it in India and then on your return at the airport,
15:41 you sort of exchange it and take back your foreign currency.
15:46 So therefore, the ease of using UPI, its interoperability and another thing which we have done is that
15:54 we have streamlined the QR codes. Earlier, each merchant would have a number of multiple QR codes.
16:02 Now there are just two QR codes. One is the UPI QR code, which is hugely popular.
16:08 And then there is another QR code, which is the Bharat QR code. That has been there.
16:16 That is also there. So you will have only two QR codes, but mostly it is a single UPI code,
16:25 which you have, which is used by everybody. And now that has been made interoperable
16:30 with our central bank digital currency, the E-Rupee.
16:35 So as a matter of fact, I remember you took over when the Indian reference crisis was actually panning out
16:41 and by the end of your tenure, you would probably be the longest serving governor of the RBI in several decades.
16:47 What do you see as your single biggest achievement? It's been a crisis, fire fighting kind of a tenure,
16:54 at least initially, especially during COVID. What do you see as your biggest achievement during the years that you've been at the hub?
17:00 You see, I joined just about a couple of months, two, three months after the ILFS crisis.
17:07 That happened around August, September of 2018. And I joined in December 2018.
17:15 So already the financial market was in a kind of a major turmoil, crisis of confidence,
17:21 activities in the market, financial markets had frozen. Then we had in 2020, the COVID crisis.
17:30 Then we had the Ukraine war and its fallout. Then all these recent, you know, recent multiple shocks.
17:38 It's not my achievement. And I think I would like to put it that it's RBI's achievement,
17:44 because I give them whatever we have done, I would like to give the credit to the entire team RBI.
17:50 And I'm not saying it just because I'm speaking from a platform to sort of, to the,
17:55 it's not a cliché, I think I generally mean it. It's the achievement of the RBI.
17:59 And I think the major achievement is to bring stability into the financial sector,
18:07 stability in the financial sector, stability of the currency, stability in the, you know,
18:14 the, what you call the external sector and your right of the confidence, the public confidence,
18:20 the investor confidence, not only investor confidence in India, but investor confidence outside.
18:27 So I think bringing that stability to the financial sector, it has been the major achievement
18:34 of the Reserve Bank of India in the last five years.
18:37 (Applause)
18:40 (Audio cut)
18:48 It carries a lot of weight. And, you know, in one event, which I was participating in,
18:55 Kochi last year, it was a lot of college students present.
19:01 So one college student, a girl, she stood up and asked me, Governor, how does it feel?
19:08 You know, you signed the Indian currency. So how does it feel? Does it give you a sense of power?
19:14 So I told her, look, it's not a sense of power. It's a sense of responsibility.
19:22 It's a sense of responsibility because what does the governor say?
19:26 I promise to pay the bearer so much. When I say I promise to pay the bearer,
19:32 the responsibility of the Reserve Bank is to maintain stability, the price stability.
19:38 So the value of the rupee does not go down because of high inflation.
19:43 So there is a commitment behind that signature on behalf of the sovereign that we will give stability to the,
19:51 you know, we will ensure price stability, stability with regard to inflation.
19:56 So it's a huge responsibility. It's a huge responsibility. And that's it.
20:03 Right. So we'll open it for a few questions from the audience.
20:06 It's been a fascinating conversation from the man himself who's at the vanguard of Indian economy.
20:12 So a few questions and then I think sir has to push off for another meeting.
20:16 So, right there, first question.
20:18 First of all, great achievements. I mean, since you've been at the helm,
20:21 and all investors, I represent a company, investment company out of Dubai,
20:25 and we are a foreign investor into India.
20:27 And we have a very high regard for what the Central Bank of India has achieved, being investing globally.
20:35 I want to ask you, over the last decade, interest rates globally were very low
20:40 and gave a great opportunity for a country like India, which requires long term capital,
20:45 to raise capital at very low rates. For example, you know, take a 30 year bond or sovereign bond.
20:50 What prevented India from not raising large amounts of capital and, you know,
20:54 many countries, you know, who are continuously raising capital.
20:58 Thank you for your question.
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