Reserve Bank Governor Shaktikanta Das on Monday said that on the back of countercyclical measures undertaken by the government, structural reforms need to be continued to revive demand and support the economy.
Also, green shoots are now visible and need to be sustained to pull India out of its current slowdown.
In an interview with PTI, he said the fallout of the outbreak of novel coronavirus in China needs to be closely monitored by “every policymaker” to tailor a swift response.
While Finance Minister Nirmala Sitharaman’s Budget for 2020-21 and recent steps have created a facilitating eco-system for reviving demand and consumption through a push on infrastructure projects, it is necessary to undertake land and labour reforms, bring efficiencies in agri marketing and focus on skill development, the RBI governor said.
The RBI saw an imminent slowdown in growth early in 2019 and used the space that was opened up by the moderation in inflation to cut interest rates on five consecutive occasions, he mentioned.
He cited global trade and business uncertainties together with sluggish domestic demand leading to lower capacity utilisation at factories and twin balance sheet crisis of rising non-performing assets (NPAs) or bad loans on the one hand, and heavily indebted corporates on the other, for the slowdown of the economy.
“There are certain positive evidences visible. Things are slightly picking up but we have to wait and see whether these positive trends are sustaining themselves and we have to see how durable they are,” he said.
He refused to say if the growth slowing down to 4.5 per cent in the July-September was the bottom of the pit that the economy can see. “As I have said there are evidences of positive developments. But we have to see how durable are these positive developments before we pass a judgment that from here on it is an upward trajectory.”
“By and large, if you look at our projection which we have given, things should start improving in the next financial year. We have projected 6 per cent of GDP growth for 2020-21 against 5 per cent for the current fiscal,” he said.
India’s economic growth is expected to drop below its previous quarter rate of 4.5 per cent in October-December despite the slight recovery in the industrial production and positive manufacturing PMI mainly due to the low growth in manufacturing and construction as well as the private consumption.