Finance Minister Nirmala Sitharaman on Saturday said the timing of the Reserve Bank decision to hike policy rates on May 4 “came as a surprise” to many but people thought it “should have been done anyway”.
“It came as a surprise because it’s between the two MPCs (Monetary Policy Committee meetings). But the US Fed had been saying it all the while,” Sitharaman said in her first reaction to the RBI rate hike.
“And then in the last MPC meeting, I think the RBI sort of gave indication that it’s time for them to also act,” she said.
“It’s the timing which came as a surprise to many, but the act itself people thought should have been done anyway…. to what extent could have varied,” Sitharaman said at the ET Awards function. The RBI hiked the Repo rate by 40 basis points to 4.40 per cent and the cash reserve ratio by 50 bps to tame inflation.
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“In a way it was a synchronised action. Australia did it and the US was going to do it and that night the US really did take the first measure,” she said. US Fed hiked the policy rate by 50 bps on the same day. “So, I see a greater understanding among central banks nowadays. And obviously, when they meet at the World Bank meeting in Washington, there’s a lot exchanged as well,” she said.
“But the understanding of how to handle recovery from pandemic is not therefore unique or typical for India, it’s a global issue. And even as we handled that recovery, inflation, which was really festering… and festering at some unbelievable highs, let us say in the US and the UK, not so much in India,” the FM said.
“Still, the challenge of recovery versus inflation seems to be following a particular template which is across the globe,” she said.
Earlier, addressing a function to celebrate 25 years of National Securities Depository Ltd (NSDL), Sitharaman flagged anonymity as an “inherent risk” in blockchain technology and called for taking precaution in future with a rise in the use of this technology.
However, Sitharaman said using the distributed ledger technology (DLT), which is also called as blockchain, is absolutely imperative and the government also supports the use of the same.
“Unless we are able to guard ourselves against that anonymous element which can itself pose an inherent risk, we probably will be exposing ourselves much more than ever we would have imagined,” she said. The minister’s remarks come ahead of the launch of the budgetary announcement of central bank digital currency (CBDC) which is based on the blockchain technology.
FM launched ‘Market ka Eklavya,’ an online investor awareness programme for students in Hindi and other regional languages. The programme aims to introduce the basics of the securities market to students. “NSDL’s great work especially in the last 2 years has brought a lot of dynamism to the institution. It has been acquiring global best practices and has been ahead of the curve. Through ‘Market ka Eklavya’, you will be able to reach out to many who are in need of financial literacy,” Sitharaman said.
Sebi Chairperson Madhabi Puri Buch, who was present on the occasion, unveiled NSDL’s blockchain platform for debenture covenant monitoring.
Buch said the depository is working to adopt new technologies and building critical market infrastructure for the security and covenant monitoring of bond issuances. “Going forward, today will also be remembered as an important day as we are taking the first step in terms of use of distributed ledger technology in the market,” she said.
