A Review of the Economy by RBI Governor & CEA:
RBI Governor has addressed the FICCI members on Monday and has extensively analysed the status of the economy at present and has also given some prescriptions for the ailing Indian economy which are worth consideration:
The undertone of the RBI Governor (RBI -G) is seen to be a little pessimistic but the fact remains that the reality should be understood in the right perspective so that we may initiate the right remedial measures without any let up.
He observes that the V shaped recovery could take a longer time than predicted by some and has called for a policy focus on increasing India’s participation in global value chains. No doubt the good monsoon and bounty kharif produce do give some hopes but the farmers still struggle to eke out a good living as they fail to get rates for their products. Unemployment issue is a major challenge. OECD has warned that the Indian economy will shrink 10.2 % in FY 21. The impact of Covid infections have not really diminished as in India it has crossed 50 Lakh mark. Interest rates have come down due to liquidity easement and the bond markets are showing some respite in demand. But the inflation is still above the RBI’s target range. The fragility of NBFCs is a cause for concern. Export is an area of concern as India has not prioritized it and hence missed the bus due to rising protectionism and weak global demand. India has totally banned onion exports now.
Services such as transportation, Banking, IT, legal services branding, marketing and after sales services should emerge as integral part of Global value chain to get the advantage of export benefits. Trade agreements should be revisited to turn that into advantage India.
CE Advisor of GOI has indicated that focus on growth and development should be aimed at as we are coming out of pandemic fear. The debt recast by banks should not be viewed as the permanent solution for industries. recovery is certainly on in manufacturing viewing the increase in E Way bills, railway freight, cement and steel production, power generation and PMIThe services sector is sluggish. Food inflation is an area of concern.Govt spending and discretionary spending will only help to boost the GDP.
Keeping in mind all these observations of economic experts, the stock markets will only have sideways- movements and hence investors are advised to take calibrated move in the days to come.
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