Indian central bank sees positive signs
A very careful policy trajectory has to be followed, RBI governor warns
The Indian economy has started showing signs of normality with the easing in lockdown restrictions across the country, Reserve Bank of India (RBI) governor Shaktikanta Das said yesterday.
He said, post containment of Covid-19, a very careful trajectory has to be followed in orderly unwinding of countercyclical regulatory measures. The financial sector should return to normal functioning without relying on regulatory relaxation as the new norm, he added.
“The Indian economy has started showing signs of going back to normality after easing of restrictions,” Das said at the seventh SBI Banking and Economics Conclave.
Covid-19 is the worst health and economic crisis in the last 100 years with unprecedented negative consequences for output, jobs and well being, Das said.
“The pandemic has dented the existing world order, global value chains, labour and capital movements across the globe,” Das said.
Das said the pandemic, perhaps, represents so far the biggest test of robustness and resilience of “our economic and financial system”. While the multi-pronged approach of the Reserve Bank has provided a cushion from the immediate impact of the pandemic on banks, the medium-term outlook is uncertain and depends on the Covid-19 curve, he said.
“Policy action in the medium-term would require a careful assessment of how the crisis unfolds,” he said, adding that building buffers and raising capital will be crucial not only to ensure credit flows but also to build resilience in the financial system.
Rate cuts boost
The RBI Governor said that from February 2019 until the onset of Covid-19 in the country, the repo rate was cut on a cumulative basis by 135 basis points. The move was taken primarily to tackle the slowdown in growth which was visible at that time, he said.