Challenges in investment, consumption revival: RBI
The country's foreign exchange reserves increased by $456 million to a fresh lifetime high of
$454.948 billion in the week to Dec. 20. In the previous week, the reserves had risen by
$1.070 bn to $454.492 bn. In the reporting week, foreign currency assets surged by $311 mn to $422.732 bn, the RBI said. Gold reserves increased by
$164 mn to $27.132 bn.
The labour ministry will enforce the EPFO’s decision to restore pension commutation, or advance part-withdrawal, under the Employees' Pension Scheme from January 1, 2020, a move that will benefit 6.3 lakh pensioners, a source said. The provision for commutation of pension was withdrawn by the EPFO in 2009. The ministry would issue a notification on January 1.
Reviving the twin engines of consumption and investment while being vigilant about spillovers from global financial markets remains a critical challenge for the government, going forward, the Reserve Bank of India (RBI) said in the latest Financial Stability Report released on Friday.
On the domestic front, aggregate demand slackened in Q2 FY20, further extending the growth deceleration. While the outlook for capital inflows remains positive, India’s exports could face headwinds in the event of sustained global slowdown, but current account deficit is likely to be under control, reflecting a muted energy price outlook, wrote RBI governor Shaktikanta Das in the foreword to the report.
Various policy announcements by the government, coupled with the Reserve Bank’s accommodative stance, are expected to provide an enabling environment to bolster economic performance in the medium-term, though shortterm pressures remain. Reviving the twin engines of consumption and investment while being vigilant about spillovers from global financial markets remains a critical challenge, going forward, said the RBI.
The economy is undergoing a slowdown, with the GDP in Q2FY20 growing at a mere 4.5 per cent. The government has announced a slew of measures in the last few months to revive growth, ranging from bank recapitalisation to removal of tax on the super-rich.
The global economy confronted a number of uncertainties–a delay in the
Brexit deal, trade tensions, whiff of an impending recession, oil market disruptions and geopolitical risks–leading to significant deceleration in growth. These uncertainties weighed on consumer confidence and business sentiment, dampened investment intentions and are likely to remain a key drag on global growth. Predictably, lower interest rates and easy monetary policies are boosting leverage globally, with the indebtedness of emerging market (EM) governments and households showing a distinct increase, besides supporting asset prices and capital flows to EMs, said the RBI report.
“India’s financial system remains stable notwithstanding weakening domestic growth; the resilience of the banking sector has improved following recapitalisation,” the report said.