Shaktikanta Das, the governor of Reserve Bank of India on Monday has said that the Indian economy has registered a pick up that is stronger than expected. There has been an improvement in the growth outlook but he also sounded cautious and said that one needs to watch out for the fresh surge in infections and its downside risk. The other things that have to be watched out are the possible reassessment done by the markets around expectations of the vaccine and the sustainability of demand after the festivals.
The statement by the Governor came at an important time when the GDP is revised by the forecasters and in the second quarter, there is a decline in the numbers as there is a rebound in the economic activity. Soumya Kanti Ghosh, who is the chief economist of the SBI group has said in a report that in the September quarter the economy might shrink by 10.7%. It is against the earlier forecast that was made of 12.5%. An 8.6% contraction has been estimated by RBI in the second quarter and this means that India will slip into a technical recession because of the fall in the economy in two consecutive quarters.
The GDP numbers for the second quarter is due to be released by the government on Friday.
At an India event for the Foreign Exchange Dealers Association, Soumyakanti Das has said that there has been a sharp contraction in the quarter of June, and in the second quarter there has been a multi-speed normalization of activity. He further added that a stronger than expected pick up is exhibited by the Indian economy in the momentum of recovery. A stronger than expected rebound inactivity has also been witnessed by the global economy in Q3. Accordingly, the IMF has revised its assessment in 2020 for global growth to a contraction that is less severe than what has been assessed in June 2020.
He also said that with regards to the availability of foreign exchange the Indian economy is in a comfortable position with a key source of resilience. There is a surplus current account balance in the country over two quarters and it has also witnessed foreign direct investment and resumption in the portfolio. Because of this, the forex reserve of India has already hit $572 billion and out of it, $110 billion came out this year. The governor has also spoken about easing the markets of an accommodative monetary policy that is continuing. He again spoke about the guidance of the monetary policy in October that emphasizes the dire need to see through the inflationary pressures that are impending temporarily and an accommodative stance is needed to be maintained that will go into the next financial year.
It has also been indicted by the RBI governor that on the capital front there is going to be more liberation and more capital account convertibility.
Glenda Bozeman – Business and Services
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