Economic recovery to be gradual: Das RISING INFECTIONS POSE A CHALLENGE
RBI remains ‘battle-ready’ to back economy
The country’s economic recovery is likely to be gradual as efforts towards reopening the economy are confronted with rising Covid-19 infections, Reserve Bank of India governor Shaktikanta Das said on Wednesday. He said the economic recovery is not fully entrenched and that the GDP data for the first quarter (Q1) was a telling reflection of how Covid-19 has affected the economy.
The economy contracted by a record 23.9 per cent in the April-June quarter as the pandemic outbreak and the subsequent lockdown brought economic activity to a complete halt. For the full year, the economy is expected to contract by 8-14 per cent.
“The end-August press release of the National Statistics Office (NSO) was a telling reflection of the ravages of Covid-19. Nevertheless, high frequency indicators of agricultural activity, the purchasing managers index (PMI) for manufacturing, and private estimates for unemployment point to some stabilisation of economic activity in Q2, while contractions in several sectors are also easing. The recovery is, however, not yet fully entrenched and moreover, in some sectors, upticks in June and July appear to be levelling off. By all indications, the recovery is likely to be gradual as efforts towards reopening of the economy are confronted with rising infections,” said Das while addressing the Ficci national executive committee meeting.
The central bank chief said the policies for durable and sustainable high growth in the medium-run after the crisis are equally important and listed five critical areas, which according to him, would determine the ability to step up and sustain India’s growth in the medium-run: (i) human capital, in particular education and health; (ii) productivity; (iii) exports, which is linked to raising India’s role in the global value chain; (iv) tourism; and (v) food processing and associated productivity gains.
“While dealing with the immediate crisis management challenges, we need to strategically prepare for our combined overriding goal–the pursuit of strong and sustainable growth. The private business sector has a critical role in each of the five areas I covered today. The enabling policy environment would
◗ Recovery is not yet fully entrenched and in some sectors, upticks in June and July appear to be levelling off
◗ Immediate policy response to Covid has been to prioritise stabilisation of the economy
evolve around the initiatives taken by India’s businesses to seize these opportunities and actualise the potential of the Indian economy as a rising economic power of the 21st century. Covid-19 has changed our lives and it is increasingly clear that life will never be the same again. We should look upon these fundamental changes as opportunities rather than threats, converting them into game changing new vistas of progress,” said Das.
The governor said the RBI remains ‘battle-ready’ to take measures to support the economy as and when needed and that the immediate policy response to Covid in India has been to prioritise stabilisation of the economy and support a quick recovery.
Das said that despite a large government borrowing programme, the steps taken by the RBI to ensure ample liquidity has ensured that bond yields remain low and are currently the lowest in the past 10 years due to surplus liquidity.