Impact of demonetisation will be a sharp ‘V’, banks have done a Herculean job: Urjit Patel

Impact of demonetisation will be a sharp ‘V’, banks have done a Herculean job: Urjit Patel

Urjit Patel interview: Demonetisation will result in a downgrade of growth for a short period of time.

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RBI Governor Urjit Patel (File Photo)

Marking 100 days of demonetisation, Reserve Bank of India (RBI) Governor Urjit Patel said the impact is going to be a sharp “V”, resulting in a downgrade of growth for a short period of time. However, he added that the central bank is remonitising at a very quick pace. In an exclusive to Network 18, Patel said the RBI has managed to bring the situation to normal along most of the dimensions after demonetisation. He added that it was part of the plan to be printing currency notes to full capacity from day one and to reach a threshold point in the process when things become more or less normal.

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Despite the criticism received regarding demonetisation, Patel said the RBI has gone about its work and undertaken major challenges in the last few months. “…Not only the RBI, but the wider banking system has done a Herculean job over the last few months and over this period when there were many challenges. That is also important to keep in mind given the scope of the challenge, how far people worked to get over them, ” he told Network 18, adding that that it is important to grow a thick skin fast in this business.

On February 8, the RBI decided to hold rates following its monetary policy meet. Asked about the policy decision, Patel told Network 18 that the main objective of the committee is to have an inflation target of about 4 per cent — as mandated by the government backed by legislation. “Inflation, excluding food and fuel, is something that has been stubborn since September-October and has shown a little sign of coming decisively below 5 per cent,” he said, adding that the next step for the committee is to look beyond the headline number to see where the kind of disinflation that is needed to take inflation towards 4 per cent will come from.

Also Read | Demonetisation idea wrong, don’t blame its execution: Rajiv Bajaj


On the creation of the monetary policy committee (MPC) itself — introduced towards the end of 2016 — Patel said that its constitution enables diverse views on how policy is established. He said, “I think that is a very important milestone in our economic history that the monetary policy is now determined through a committee process where there are both independent committee members and representation from the RBI.”

The Reserve Bank of India recently revised India’s growth to 7.4 per cent in 2017-’18, which is around 50 basis points more than the projection for the ongoing fiscal. Elaborating on the reasons behind the economy’s recovery, Patel listed the last five months’ positive export growth and the Budget announcements in relation to the reality, housing and rural sectors. “Our central estimate for next year is 7.4 per cent which I think is a highly respectable growth rate under the circumstances.”

You can read the entire interview on