Skip to main content

Growth slowdown bottoming out, says RBI governor

Growth slowdown bottoming out, says RBI governor 
While expectations on price rise remain stable for the moment, “considerable caution and vigilance is warranted on the inflation front” but the slowing in growth could be over, said Reserve Bank of India (RBI) Governor Urjit Pate
“Recent success in containing inflationary pressure needs to be viewed in the broader context of entrenching macroeconomic stability, in which the government has play edacrucial part,” Patel said in opening remarks at a recent conference on ´Financial System and the Macroeconomy´.
The consumer price index (CPI)based inflation rate quickened to 4.88 per cent in November, from 3.58 per cent in October.The rate in June had fallen to a record low of about 1.5 per cent.The central bank works within a framework that aims to keep inflation anchored around a central 4 per cent, in a range of another two percentage points either way.
The government has actively managed price pressure on some key food items, the governor said. “The economy is at an important juncture.Our recent growth numbers might have disappointed some in the first quarter of this fiscal year but the second quarter (JulySeptember) has recorded an up tick and the slowdown may well be bottoming out.”
“If one sees far, structural changes that temporary disruptions can be growth augmenting in the medium to long what has happened, for instance, with of the GST (goods and services tax). It gains that will mean better tax compliance more efficient tax system that, in turn, permanent upward push to our growth.” He mentioned a couple of positives.
current account deficit remains within levels.Other indicators of external viability, such as the ratios of in debtedness to GDP (gross domestic product) and/or reserves, are also reflecting a healthy improvement.” In this context, Patel praised the government for pursuing a path of fiscal consolidation and containing the public debt.
As a result, international investors have warmed to where the Indian economy is positioned, reflected in sizable foreign investment inflow.Meanwhile, domestic financial markets have shown resilience and stability, in spite of escalation in global geopolitical uncertainty and heightened financial market volatility, he said.
“These developments have enabled the buildup of buffers against unforeseen shocks.” India´s foreign exchange reserves have crossed Rs 400 billion.RBI deputy governor Viral Acharya said on Thursday at a separate event that reserves, without some form of capital control, were not enough to stem volatility when portfolio flows reverse.
Through caps on investment and coupons that can be offered to investors, India has raised some protection against such an eventuality.While stating that India and other emerging countries are in an environment of excessive financialisation, the RBI governor once again argued for making swap lines with developed countries equally available for everyone, rather than keeping these for a privileged few.
“While emerging markets have shown a degree of resilience to the turmoil of recent years, they remain vulnerable to liquidity and bridge financing gaps that are debilitating, even if transitory.Against this background, building up adequate buffers in the form of foreign exchange reserves is a natural self insurance to manage these risks better and, thereby, prevent the risks from assuming systemic proportions, threatening financial stability,” Patel said.
Terming the Insolvency and Bankruptcy Codea ´landmark development´, he said the ensuing ordinance “scales up the ability of the Reserve Bank to deal decisively with stress in banks´ balance sheets and unclog the flow of credit to grease the wheels of growth.” “In the year ahead, we must seize this opportunity to overcome the debilitating problem of corporate loan delinquency and get our banks back into the main stream of financial intermediation.”
The Business Standard, New Delhi, 15th December 2017


Popular posts from this blog

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

Differential Tax Levy under GST: Food Firms May De-Register Trademarks

Differential Tax Levy under GST:Food Firms May De-Register Trademarks The government’s decision to charge an enhanced tax rate on trademark food brands is leading several rice, wheat and cereal manufacturers to consider de-registering their product trademarks. Irked by the June 28 central government notification fixing a 5 per cent goods and services tax (GST) rate on food items packaged in unit containers and bearing registered brand names, the industry has made several representations to the government to reconsider the differential tax levy, which these players say is creating an unlevel playing field within these highly-competitive and low-margin industries. Sources say that the move has affected the packaged rice industry the hardest and allowed the un-registered market leaders, India Gate and Daawat, to gain advantage as compared to other registered brands such as Kohinoor and Lal Qilla. Smaller players are even more worried with this enhanced rate of tax (against the otherwise …