India at the cusp of economic recovery: RBI Governor

India at the cusp of economic recovery: RBI Governor

• By Staff Writer

India at the cusp of economic recovery: RBI Governor

MUMBAI: India is at the doorstep of economic recovery after a record contraction as monetary and fiscal policies moved in tandem, but the government has to spell out a roadmap on how it would get back to fiscal prudence post pandemic, said RBI Governor Shaktikanta Das who is battling a bond market disconcerted over state borrowings.

“I think once there is 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 and his committee (FRBM) have set out,” Das was talking at the virtual book launch of portraits of power written by NK Singh.

Governor Das post last monetary policy review said the bond markets should be cooperative and not combative as the yields on benchmark bonds kept spiking above 6% and led to devolvement during bond auctions. RBI subsequently doubled its quantum of bond purchases and for the first time began buying state government bonds to ease investor worries about excessive government borrowing.

Das added that India’s fiscal and monetary policy were working in close co-ordination.

“In India both the fiscal and monetary policies are in a accommodative stance, both policies are working in close symmetry, infact both policies today are counter cyclical,” the governor said. “This year the deficit of the central and the state government is already exceeding, it’s a known fact.”

The governor added that, India is at the doorstep of economic revival process due to the after-effects of the pandemic and it was important that financial institutions were well-capitalised to support this recovery.

Rating agency ICRA on Tuesday said that the recovery in the Indian economy from the pandemic-induced lows seen in April 2020, both broadened and build up in September 2020. The agency expects the contraction in India’s real GDP to narrow to around 11-12.5% in the second half of the current fiscal year from the sharp 23.9% recorded in the June quarter.

Das also praised the government for its efforts of providing financial relief to the marginalised.

“The government has undertaken several measures in a very prudent manner and well calibrated way, first to provide relief to the vulnerable sections of the society and then to other segments like MSMEs,” he said.

The governor also said that banks who don’t indulge in smart-accounting practices and focus on governance reforms which emerge stronger in any crisis.

“The issue of Governance of banks and non-banks has become very important, entities which has robust practices, internal control systems, risk assessment and which do not undertake smart accounting, those are the ones which are never over-leveraged and they grow in every crisis,” he said. “Governance reforms is ownership agnostic it’s about improving the practices in banks, the functioning of the board and board committee and the chief executive.”