INSUBCONTINENT EXCLUSIVE:
NEW DELHI: The Reserve Bank of India (RBI) remained concerned about the slower pace of growth in Indian economy amid uncertain macroeconomic
data, minutes of the February policy meeting of the Monetary Policy Committee (MPC), showed on Thursday.
Deputy Governor Michael Debabrata
Patra said that high-frequency indicators were not offering definitive evidence yet that the downturn was bottoming out
evolving macroeconomic configuration.
Of late, wholesale prices-based inflation accelerated to a 10-month high of 3.10 per cent in January
mainly due to costlier food articles, while retail inflation jumped to a 68-month high of 7.59 per cent.
Governor Shaktikanta Das added that
the global economic activity slowed down and the prospects had weakened even further with the outbreak of coronavirus, as China is the
second-largest economy, and it was a key player in the global supply chain.
However, he believed that some green shoots are, however,
visible in Indian economy with rabi sowing higher by 9.5 per cent
Besides, horticulture production has also risen to a record level in 2019-20
This bodes well for farm incomes and boosting rural demand.
Commenting on Union Budget, he said the government has sought to provide
counter-cyclical support to the economy while broadly adhering to fiscal prudence
of headline inflation was expected to moderate, but given the prevailing uncertainty, it was prudent to wait for more clarity based on
three months, driven mainly by an unprecedented spike in onion prices.
b) Domestic economic activity has remained weak with GDP growth
estimated at 5.0 per cent for 2019-20 being the lowest in the last 11 years.
c) Some of the major factors that have contributed to the
growth slowdown are (i) ongoing deleveraging by the private corporate sector; (ii) continuing large inventory overhang in the residential
real estate market; (iii) issues facing the auto sector; (iv) decline in income levels in rural areas due to low food prices in previous two
years and deceleration in the growth of wages of agriculture and non-agricultural labourers; and (v) global uncertainties, especially trade
All these factors have reduced aggregate demand by impacting investment and private consumption.
d) Global uncertainties relating to trade
tensions and Brexit have abated, a new uncertainty from coronavirus has arisen
It is expected that the epidemic of coronavirus will be overcome soon
However, should it prolong and spread, it will have ramifications for the global economy and its net impact on the Indian economy might be
negative even if oil and other global commodity prices decline.
Ravindra Dholakiaa) The headline CPI inflation going forward is expected to
show a declining trend for at least a year to come
Some new uncertainties have, however, emerged that could need some policy space for the future.
b) Moreover, Budget has presented a fiscal
policy of the Centre that borders on being contractionary rather than expansionary on misplaced concerns about fiscal slippage in the face
of a serious growth slowdown.
c) Budget has been presented with no major impact on both growth and inflation in my opinion
As a result, there is no risk of output gap closing rapidly in the short to medium term
Global growth slowdown is confirmed by now.
d) There is a definite space for policy rate action.
Pami Duaa) Industrial growth is also
credit to the commercial sector, that remained tepid till the MPC met last in December, picked up in the last two months
This should nurture growth impulses
The increase in the monetary transmission of the cumulative reduction in the policy repo rate by 135 basis points from February to October
2019 should also help in reviving economic activity.
c) At the same time, while growth is slowing, headline inflation has increased beyond
the upper tolerance band and is expected to remain at elevated levels (5% or above) through Q2FY21.
Chetan Ghatea) Real sales of 286 listed
private manufacturing companies in the manufacturing sector in Q3FY20 continued to weaken
Capacity utilisation was lower at 69.1 per cent in Q2FY20, consistent with low fixed investment and a negative output gap.
b) On the
positive side, broader economic activity is beginning to show preliminary signs of a turn-around