Urjit Patel
Appearing before the Parliamentary Standing Committee on Finance, RBI Governor Urjit Patel on Tuesday said that the effect of demonetisation was temporary while he will respond to issues related to the RBI's autonomy and reserves in the next 10 to 15 days in the midst of differences with the government.
He told the members that the economy was faring better than the pre-demonetisation period in the "after phase" of demonetisation with the adverse effects receding, sources said.
The Reserve Bank of India's (RBI) Governor's appearance also came in the midst of a government-central bank tussle over autonomy, reserves to be maintained by RBI and liquidity concerns and he has been asked to give his response on these issues besides control of institutions (in respect of frauds in banks) and lending to MSME sector. It had led the central bank to flag autonomy concerns.
"He will reply in 10 to 15 days," the sources said after the two-and-a-hour meeting.
Patel appeared before the 31-member panel headed by Congress leader M. Veerappa Moily on Tuesday to brief on the impact of demonetisation, non-performing assets (NPAs) of public sector banks and state of economy, among other issues.
The RBI Governor said the banking regulator will consider the international practice in terms of reserves kept by central banks and will share its views in its response. The government believes RBI is sitting on extra reserves which can be used to fuel growth.
While Patel maintained there was no conflict with the central government, the source said he warned the panel members, which included former Prime Minister Manmohan Singh, of the possibility of global trade war leading to a currency war.
On domestic economy, Patel is learnt to have said that the Indian economy is stabilising and is in a comfortable position with positive indicators like rising GDP, falling crude oil prices, credit growth up 15 per cent, inflation down and food inflation below 2 per cent.
"Patel said for every single dollar drop in crude oil price, there is a fall of $800 million in the country's current account deficit (CAD) annually. You can calculate the overall benefit in terms of CAD for the more than $20 decline in oil price," he said.
