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Mumbai: Reserve Bank of India (RBI) Governor Dr Shaktikanta Das today said that the central bank will persevere with its paramount objective of reviving the economy with some additional measures to enhance liquidity support to targeted sectors having linkages to other sectors; deepen financial markets and conserve capital among banks and NBFCs through regulatory initiatives.
He said, it will also strengthen supervision through strengthening the audit functions; facilitate external trade by improving ease of doing business for exporters and upgrade payment system services to expand financial inclusion and improve customer service.
Turning to the growth outlook, he stated that recovery in rural demand is expected to strengthen further, while urban demand is also gaining momentum. He said consumers remain optimistic about the outlook and business sentiment of manufacturing firms is gradually improving.
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Saying that fiscal stimulus is increasingly moving beyond being supportive of consumption and liquidity to supporting growth-generating investment, he pointed out that private investment is still slack and capacity utilisation has not fully recovered.
The RBI governor said, the real GDP growth is projected at minus 7.5 per cent in 2020-21: (plus) 0.1 per cent in Q3 of 2020-21 and (plus) 0.7 per cent in Q4 of 2020-21; and 21.9 per cent to 6.5 per cent in H1:2021-22 with risks broadly balanced.
Das highlighted that the measures taken by the Reserve Bank over the year gone by have also resulted in a significant moderation in the structure of interest rates across the spectrum, narrowing of risk spreads, and a record issuance of corporate bonds.
He said the overall bond market conditions have evolved in an orderly manner and engendered congenial conditions for other segments of financial markets that price financial instruments off the G-Sec yield curve. He noted that debt management operations, monetary operations and market expectations are in harmony and share a common outlook which he added augurs well for financial stability.
The Reserve Bank, on its part, he said, stands ready to undertake further measures as necessary to assure market participants of access to liquidity and easy financing conditions.
Das claimed that the Reserve Bank has been taking measures for dampening volatility and enabling orderly evolution of the exchange rate in consonance with underlying domestic fundamentals.
Das added that the apex bank will continue to respond to global spillovers to secure domestic stability with their liquidity management operations. He informed that various instruments at the command of the Central bank will be used at the appropriate time, calibrating them to ensure that ample liquidity is available to the system.
The RBI Governor also informed that CPI inflation rose sharply to 7.3 per cent in September and further to 7.6 per cent in October 2020, with some evidence that price pressures are spreading. He added that the inflation outlook has turned adverse relative to expectations in the last two months.
He said, while cereal prices may continue to soften with the bumper Kharif harvest arrivals and vegetable prices may ease with the winter crop, other food prices are likely to persist at elevated levels.
CPI inflation is projected at 6.8 per cent for Q3:2020-21, 5.8 per cent for Q4:2020-21; and 5.2 to 4.6 per cent in H1:2021-22, with risks broadly balanced, the RBI governor said.
