The Indian economy is at the doorstep of recovery after a record contraction, said RBI Governor Shaktikanta Das. The Indian economy that has been facing difficulties for the last couple of years, majorly due to the global slowdown and lately the Coronavirus pandemic as well. He also said that it was important that financial institutions of the country were well-capitalised to support the economy recovery.
RBI Governor also stated that the fiscal measures taken by the government to deal with the Covid-19 pandemic have been well-calibrated and prudent so far, in terms of addressing the woes the Indian economy is facing. As he further added, both the fiscal and monetary policy were counter-cyclical and accommodative and both were working in close symmetry.
RBI Governor praised the Indian government’s measures to provide relief to the vulnerable sections of the society and to other segments like MSMEs.
He also said that governance reforms are ownership agnostic and about improving the practices in banks, the functioning of the board and board committee and the chief executive.
According to RBI Governor, the banks who don’t indulge in smart-accounting practices and also focus on governance reforms will emerge as stronger in the post-covid scenario.
During an event, Shaktikanta Das said, “I think once there is a containment of the pandemic, the government will certainly have to spell out a fiscal roadmap to adhere to the debt-to-GDP target that Mr Singh (NK Singh) and his committee (FRBM) have set out.”
While the bond market is agitated over the state borrowings, RBI Governor said he bond markets should be cooperative and not combative as the yields on benchmark bonds kept spiking above 6% and resulted in developments during bond auctions. The apex bank subsequently doubled its bond purchase quantum. Also, for the first time, RBI started buying state government bonds to ease the investors’ worries about excessive government borrowings.
Rating agency ICRA has said that the recovery in the Indian economy from pandemic-induced crisis started in April 2020, broadened and strengthened in September 2020. ICRA forecasts the contraction in India’s real GDP to narrow to around 11-12.5% in the second half of FY21 from sharp 23.9% recorded in the first quarter of current fiscal.