Reserve Bank of India Governor Urjit Ravindra Patel on Friday lauded the government for 3 landmark reforms — the monetary policy committee (MPC) framework, the GST council and the Insolvency and Bankruptcy Code. “One cannot and should not underestimate the sagacity and uncommon courage of the government to undertake reforms that can only be described as truly transformative. These will shape for the better, our economic evolution in the years and decades to come,” Patel said on Friday.
In 2016, the government carried out amendments to the RBI Act to invest the Reserve Bank of India with the specific mandate to operate the monetary policy framework of the country whose primary objective is to “maintain price stability while keeping in mind the objective of growth”. “This was a fundamental shift in the institutional architecture for the conduct of monetary policy, with the formal transition to a flexible inflation targeting framework and the relinquishing of the monetary policy decision by the Governor to a six-member MPC,” he said at the convocation ceremony of the Meghnad Desai Academy of Economics.
He said another reform is the establishment of the GST council whereby the Government of India has created one of the most effective institutional mechanisms for cooperative federalism. “Along with the State Governments, it has offered a refreshing counter-narrative to the divisive course of the international federal dialogue, voluntarily choosing to relinquish and then pool sovereignty for a larger collective cause,” he said.
The enactment of the Insolvency and Bankruptcy Code, 2016 (IBC) is a watershed towards improving the credit culture. “The IBC provides for a single window, time-bound process for resolution of assets with an explicit emphasis on promotion of entrepreneurship, maximisation of value of assets, and balancing the interests of all stakeholders,” Patel said.
“These steps are unprecedented in the history of our nation in that they show the Government’s commitment to sound public policy by establishing institutions and ceding power to them to perform functions vital for securing and entrenching macroeconomic and financial stability,” he said. Patel further said that there is a need now is to understand micro-level price formation dynamics in new dimensions such as e-commerce, digital transactions and big cross sectional data.
“This applies to domains such as banking, non-banking financial intermediation, payments, currency management and financial inclusion as well. In the absence of this type of research, policy choices could yield sub-optimal outcomes at times,” he said.