RBI is completely against private digital currencies, says Shaktikanta Das

It is "too early" to talk about a central bank-issued digital currency due to technological handicaps, but the Reserve Bank is looking into this, governor ShaktikantaDas said on Thursday.
He, however, made it clear that the RBI is completely against private digital currency, asserting the sovereign's right over this function.

The comments come a year after the government tagged Bitcoins and other crypto-currencies illegal and following which the RBI banned trading on them, and months after social media giant Facebook announced its plans to launch a digital currency globally called Libra.
"The world over, central banks and the governments are against private digital currency because currency issuance is a sovereign function and it has to be done by the sovereign," Das told reporters at the customary post-policy presser.
"It is very early to speak on a central bank issuing digital currencies. Some discussions are going on. Technology has not fully evolved yet. It is still in very incipient stage of discussions and at RBI we have examined it internally," the governor said.
Das said discussions have also been held with governments and central banks of other countries on central bank-issued digital currencies, but added it is "too early to talk about a central bank issued digital currency."
"As and when the technology evolves with adequate safeguards, I think it is an area where the Reserve Bank will certainly look at seriously at an appropriate time," he said.
It can be noted that in the face of the mass proliferation of the crypto currencies which were declared illegal, there were also reports of the government planning to issue its own digital currency called "Lakshmi".

With growth this bad, India will need more than rate cuts to help economy

With India's growth tumbling to 4.5% from 8.1% in little more than a year, you’d be surprised to know that ShaktikantaDas has one of the easiest jobs in central banking. He just has to keep doing what he's been doing since becoming governor of the Reserve Bank of India last December: cut interest rates. Fortunately, political will is on his side.
That’s an enviable state of affairs for a central banker these days. Just look at Federal Reserve Chairman Jerome Powell, who has become a constant target of President Donald Trump’s Twitter tirades. It’s also face-saving for Das that politics and economics are pointing in the same direction. He took up this post under a cloud of question marks about the RBI’s independence. Das’s immediate predecessor, Urjit Patel, quit abruptly almost a year ago, just as the government was ratcheting up pressure for the institution to hand over some of its reserves to free up fiscal spending.
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The troubling state of Asia's third-largest economy makes Das's task uncomplicated. The pace of growth is slowing dramatically; government numbers Friday showed India’s expansion slipped in the third quarter to its weakest clip since 2013. Many big economies have been stalling, but it’s hard to think of another where growth has come down to earth this quickly. Expectations have diminished so radically that even a slowdown of this magnitude was in line with economists’ projections.
Falling toward earth
For Das to even contemplate taking his foot off the monetary pedal now would be a mistake. He should look past the recent uptick in inflation last month, largely attributed to vegetables such as onions, a staple of Indian cooking. Those price gains helped push the measure beyond the RBI's 4% medium-term target. More important is the slide in core inflation, which strips out volatile commodity prices. This points to a demand problem in the economy, as my Bloomberg Opinion colleague Andy Mukherjee wrote here.

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Das says policymakers will keep cutting rates until growth revives. The five reductions he’s overseen haven’t given the economy back its groove; so the mission is clear going into next week’s meeting, when the central bank is expected to cut again. His global peers may have done well to adopt the same approach. It's clear from the Fed’s retreat that the hikes in 2018 went too far in the face of anemic inflation. The European Central Bank had barely curtailed quantitative easing before it had to start all over again.
Lest Das be tempted to sail through, there's the iceberg of India’s banking industry to consider, which is saddled with one of the world's most dangerous loads of bad debt. The trouble is, about 60% of the financial system is controlled by state-run banks that report to the government, so Das’s ability to influence them is constrained. At some point he may well have to challenge entrenched political interests.
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The other hurdle is that India’s broken financial system hinders the ability of rate cuts to flow through the economy. Shadow banking, a big source of weakness, was also a major source of lending. That spigot appears to have largely dried up.
I wrote in February that Das was lucky: Economic need trumped the political circumstances surrounding his first rate cut. But luck doesn’t last forever. It wasn’t too long ago that economic aspirations for India echoed China’s. Now this young country of 1.4 billion people is looking more like Indonesia, Malaysia or the Philippines — that is, just another middling emerging market. At this rate, Das will need more than rate cuts and a good reputation to fix things.
(Updates to include latest GDP figures.)