'Battle-ready' RBI predicts India's economic recovery 'gradual; not yet fully entrenched'

Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday asserted that the country’s economic recovery is likely to be gradual as the rising infections of Coronavirus continue to pose a risk. While addressing the FICCI National Executive Committee Meeting held via video conferencing, Das said that the economic recovery is not fully entrenched and added that the Gross Domestic Product (GDP) data released by the government for the first quarter (Q1) was a 'reflection of the ravages of the COVID-19'.

'Recovery is, however, not yet fully entrenched'

“The recovery is, however, not yet fully entrenched and more over in some sectors the optics which was noticed in June and July, they appear to have levelled off… by all indications, the recovery is likely to be gradual as efforts towards reopening of the economy are confronted with increasing infections,” he said.

As per government data, GDP during the April-June quarter contracted 23.9 percent on account of the strict lockdown imposed by the government towards the end of March to check the spread of coronavirus infections.

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'RBI is battle-ready'

The RBI Governor also assured the industry that India's central bank stands battle-ready to take whatever steps that are needed to be taken for the economy. "RBI is battle ready... whatever measures are required will be taken by the RBI", he said.

In his address, he also spoke about the initiatives taken by the central bank to ease the liquidity situation and make available funds to the businesses impacted by the pandemic and subsequent lockdowns. Das further asked businesses to capitalise on the new opportunities created by the pandemic at the global level. The Governor further said large liquidity infusion by RBI has ensured large borrowing by the government at a low rate and in a non-disruptive manner.

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RBI is very carefully monitoring the markets

Das also said that the RBI is very carefully monitoring the markets and will take further actions as and when required. The RBI Governor said that the current bond yields are lowest in the past 10 years due to surplus liquidity. He also spoke about the education sector and said that it contributes to economic development and the New Education Policy is historic. Referring to the tourism sector, he said that it could be an engine of growth and there is a lot of pent-up demand which needs to capitalised.

Adding further Das said the "Global economy estimated to have suffered the sharpest contraction in living memory in April-June 2020 on a seasonally adjusted quarter on quarter basis. World merchandised trade estimated to have registered steep year on year decline of over 18 percent in the second quarter of the 2020 calendar year".

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(With inputs from Agencies)