New Delhi: Allaying apprehensions about the unprecedented downturn, Reserve Bank of India Governor Shaktikanta Das said on Wednesday that the Indian economy has begun to stabilize and is on a slow path of recovery.
In a virtual address to the members of industry body Federation of Indian Chambers of Commerce and Industry (FICCI), he said the uptick noticed in the economy in the June-July period now appears to be leveling off.
Giving an update on the Covid-19 pandemic, he said five areas to determine the economy’s ability to support and sustain growth in the coming months will be human capital in health and education, productivity, exports, tourism, and food processing.
India’s economy is expected to recover gradually, he said a few days after official data revealed that the country’s Gross Domestic Product (GDP) plummeted a record 23.9 percent in the first quarter of fiscal 2020-21 (April-June period).
This downturn was due mainly to the unprecedented lockdown and restrictions announced by the government to curb the spread of the COVID-19 pandemic from March 25. However, the pain was exacerbated as the economy was already struggling against low demand and weakness in key sectors.
Retail inflation eased marginally in August, but remained above the RBI’s target range of 4-6 percent, straight for five months since March.
Next month, the RBI is likely to avoid easing monetary policy further in its scheduled, bi-monthly review, due in October.
Exuding confidence on the path of recovery, Das said major indicators of agricultural activity, purchasing managers’ index (PMI) for manufacturing, and private estimates point to some stabilization of economic activity in the second quarter (July-September).
But India is not alone to suffer the pandemic’s impact on the economy. The world economy also suffered the sharpest contraction in living memory in the April-June period. Global merchandise trade registered a steep decline of more than 18% in the second quarter of the calendar year (April-June), according to the World Trade Organization (WTO)
Equity markets in the developed and emerging economies have, however, bounced back now, scaling new peaks after the pandemic-triggered crash in February-March. Also, gold prices moderated on the prospect of economic recovery, after reaching all-time in the first week of August.
Das pointed out that liquidity lines, opened to financial institutions like NABARD, SIDBI, and NHB, have percolated to cooperative banks, microfinance institutions, and small non-banking financial companies. These would go a long way in recuperating the economy at the grassroots level. The central bank is monitoring the markets and would take further measures if necessary.