Economic reform still not done: RBI Governor Shaktikanta Das


new Delhi:

Reserve Bank of India Governor Shaktikanta Das said on Wednesday that the economic recovery was still not well affected and that the central bank was “ready for war” to take appropriate measures to support development. Addressing a virtual conference organized by industry body FICCI, Mr. Das said that the government-issued Gross Domestic Product (GDP) data was “a reflection of the ravages of COVID-19”. The economy contracted a record 23.9 percent in the April-June period due to a strict lockdown imposed by the government until the end of March to prevent the spread of coronovirus infection.

“Nevertheless, the high frequency indicators of agricultural activity, the purchasing managers’ index that is the PMI for manufacturing and some private estimates on unemployment indicate some stabilization of economic activity in the second quarter of the current year, while many other sectors are certainly Causes contraction. ” It is getting easier as well, ”he said.

However, Mr. Das said that the economic recovery is not yet complete, and recovery is likely to be gradual.

“However, the recovery is not yet complete and, in addition, in some areas, the offtake, which was observed in June and July, is visible. Attempts to reopen recovery by all indications have been made. Is likely to be gradual in. He said that the economy is grappling with a growing transition.

At the same time, Mr. Das assured the industry that the RBI is “ready for the fight” and that whatever measures are necessary to support liquidity, growth and control price increases will be taken.

According to him, the immediate policy response of COVID-19 in the country has been to prioritize the stabilization of the economy and to support quick recovery policies for sustainable and sustainable high growth in the medium term post coronovirus.

The governor also said that the financial market conditions in India have significantly reduced areas in response to policy repo rates and large system-wide as well as front-loaded reductions in targeted infusion of liquidity by the central bank.

“We are monitoring the markets very carefully. Further measures will be taken when and when necessary. I have also said earlier during my statements that the RBI is fully prepared … I used the terminology that RBI The war is ready and necessary measures will be taken by the RBI, ”he said.

Despite a substantial increase in the government’s lending program, Mr. Das said that persistent large surplus liquidity conditions have ensured non-disruptive mobilization of resources at the lowest borrowing cost in a decade.

Currently, the government paper lending rate is the lowest in the last 10 years, he said.

In addition, Mr. Das said that the state of benign financing and the substantial narrowness of the spread set a record of issuing corporate bonds worth around Rs 3.2 lakh crore during August to 2020-21.

The fragility of NBFCs is a concern, Mr. Das said, adding that the RBI is regularly monitoring the health of the top 100 NBFCs and it would be the central bank’s effort not to fail any large institution.

Prior to the IL&FS crisis, Mr. Das said that there were light touch rules for the NBFC sector and RBI is now trying to bring the rules in place with banks so that the failure does not recur.

Regarding the debt restructuring plan, the RBI chief said that he would heed the industry’s suggestions.

The interests of depositors and financial stability were kept in mind while formulating the debt restructuring plan, he said, adding that it had to be a careful and balanced decision from the RBI.

“The primary concern of any banking system should be the protection of the interests of depositors because ultimately it is depositors’ money.”

“On the one hand, we have to take into account the interest of depositors, the need to maintain financial stability, the stability of the banking sector, as we do not want to repeat the situation that India experienced a few years ago where the level of NPAs of banks It had increased a lot, ”he said.

On the other hand, Mr. Das said, “We are equally mindful of the fact that COVID-19 has affected a large number of businesses and especially businesses that have taken loans from banks. Therefore, they Some relief was also required “.

He said that the thrust of Sankalp Yojana is to enable companies struggling with liquidity problem due to COVID-19 crisis to return to normalcy and resume their activities.

Therefore, both sides must be matched, he said. In fact, revival of businesses will also ensure that NPA levels are kept low and it will also ensure speedy economic recovery.

Describing the New Education Policy 2020 (NEP) as a historic and much-needed new era reform, he said it has the potential to leverage India’s favorable demographics by prioritizing human capital and increasing public investment in education sector by 6 percent Aims to increase GDP must be strictly followed.

It is important to understand that investment in education pays off by increasing average wages, he said, adding that higher education also contributes to economic growth through greater sensitivity to environment / climate change, energy use, citizen participation and healthy lifestyles.

“While the laudable crisis-time response to enhancing health infrastructure has helped deal with health emergencies, a more comprehensive approach similar to NEPs for the health sector may be warranted, covering deeper penetration of insurance Which has been given a high burden. Out of pocket expenses and preventive care in India too, “he said.

Noting that India’s participation in the Global Value Chain (GVC) has been lower than in many emerging and developing economies, he said that this potential segment needs to be tapped to boost global trade and development.

He said that with strong pharmaceutical manufacturing expertise at low cost, India is one of the largest suppliers of generic drugs and vaccines.

A sharp policy focus on other GVC intensive “network products”, including IT hardware, electrical equipment, equipment for electronics and telecommunications, and automobiles, will also provide India’s export strategy with considerable scope for higher value additions.

Describing tourism as an engine of growth, the RBI governor said that although the region is badly affected by COVID-19, it is an area where the V shape can improve if the situation returns to normal.

He also said that COVID-19 has brought out the importance of food security and food distribution or supply chain networks in the case of public policy debate in India.

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