Reserve Bank Governor Shakanta Das emphasized the need for policy support from the financial, monetary and various sectors to advance the economic revival caused by the second wave of coronavirus epidemic. Das, who attended the Monetary Policy Committee (MPC) meeting earlier this month, said the second wave of the epidemic in April and May had a negative impact on the economy, supporting the economic resurgence and sustaining it.
According to details of the MPC meeting released on Friday, “Overall, the second wave of COVID-19 has changed the near-term outlook, and all stakeholders – need financial, monetary and policy support from various sectors.
He said the pace of vaccination and the speed at which we can control the second wave in the coming season will affect the scope of economic growth and inflation. The RBI governor said the Reserve Bank is committed to taking traditional and non-traditional measures to alleviate the pressure on critical sectors affected by the second wave and effectively take measures for cash availability.
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Das and five other MPC members Shashank Bhide, Ashima Goyal, Jayant R Verma, Mridul K Sagar and Michael Debabrata voted unanimously in favor of keeping the key policy rate at 4 per cent. The RBI deputy governor’s letter said that unlike the first wave, this time the supply position was relatively strong. But aggregate demand excluding net exports has been adversely affected and therefore needs policy support.
He said that the MPC has done its job of meeting the necessary conditions by keeping the policy rate at its lowest level ever to support growth. RBI Executive Director Mridul K Sagar said the growth rate did not appear to have slowed in the first quarter as in the first quarter of the financial year 2020-21.
He said initial GDP (gross domestic product) growth projections may not fully explain the situation and the impact on the unorganized sector may be profound. Moreover, if the economy grows by 9.5 per cent this year, production levels in 2021-22 will be just 1.6 per cent higher than the pre-2019-20 pandemic, he said.
Jayant R Patil, an external member of the committee, said inflation is well above satisfactory levels and we expect this to continue to rise for some time. Ashima Goyal said consumer confidence was lower than the first wave in the second wave. It is not yet clear whether consumer demand will decrease due to high risk, or whether people will do so on their own as a precaution, but low income, job loss, high debt and poverty are sure to demand. Will reduce
According to the details, there is much uncertainty about the future of short-term growth, but there are some positive things, Shashank Bhide said. Export is expected to remain good in improving conditions of global demand. “The emphasis on reforms in capital expenditures in the central government budget increases domestic demand,” he said. Also, agriculture with good monsoon forecast is expected to contribute to economic growth.
The member said he would vote in favor of keeping the liberal stance as long as it needed to bring growth back on track and make it sustainable. Meanwhile, Rakesh Mohan, the former deputy governor of the RBI, said the COVID-19 epidemic would put a strain on banks’ stressed assets. This could put pressure on financial stability. He said passive asset (NPA) pressure has been on the country’s banks since 2015. Mohan, who served as the RBI’s deputy governor from 2002 to 2009, said, “This is more difficult for us than for other countries because we are already having bad credit problems before Kovid-19.”
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