Thu. Mar 28th, 2024
picture credits- Nasdaq

Chief of the reserve bank of India, Shaktikanta Das, on Thursday stated that the revival in India’s economic activity should continue “unabated” despite a recent surge in covid infections in many areas.

Central bank governor Shaktikanta Das certainly called the surge in the infections a “matter of concern” but said India was prepared to tackle the situation. With an ambitious and successful vaccination drive underway, he added, the stringent lockdowns imposed last year, which had a crippling effect on the economy, might not be needed again. He optimistically maintained that “This time around we have some additional insurance against the impact of the Covid-19 pandemic.”

Das in his comments to the Times Network’s India Economic Conclave stated that “The revival of economic activity which has happened should continue unabated going forward,”.

Das maintained that he did not foresee any downward revision in the growth forecast of 10.5% made by the Indian authorities for the fiscal year 2021-22. Meanwhile, Das stated facts based on preliminary data, final projections about the economic growth are yet to be published on April 7 after a review, which will be carried out by the monetary policy committee.

Worryingly, the health ministry reported that India added 53,476 COVID-19 infections on Wednesday. As per the ministry, this, accounted for the highest daily rise since Oct. 23. Earlier this week WHO, international health organization, stated that in lieu of the fresh surge in infections across Europe and India, new lockdowns and stringent action against the surge can be taken.

Additionally, Das emphasized again on the need for an orderly evolution of the government bond yield curve, saying that otherwise, it could be an impediment to economic recovery and also raise corporate borrowing costs. Das emphasizing on the need for coordination and cooperation between the bond market and the central bank stated that there was no fight between the two and that RBI was all set to continue its cooperative and accommodative stance in future.

With a higher-than-expected borrowing programme announced by the government, the bond yields had traded with an upward bias. Das reiterated that the central bank’s support for the market through open market operations and other measures, to help the smooth execution of the borrowing programme, was to continue well in future and thus would help revive the economy.

In regards to the situation of Taper Tantrum of 2013, where India experienced capital flight due to high bond yield in US market, Das stated that forex reserves and the RBI’s intervention in the currency market, was done only to keep the currency stable, with reserves being built to avert a situation similar to the “taper tantrum” of 2013, when India faced massive outflows. As India follows floating exchange rate system, RBI has been given the right to intervene in the market to stabilize the adverse situation.

Recently, India’s forex reserves swelled to $582.04 billion which made it the fourth largest reserve in the world.

Recently, concern has been expressed at the need for such high reserves, which add to the RBI’s holding costs and do not necessarily yield sufficient returns.

Das maintained that “Internally, we have no such target of reaching a particular level of forex reserves,”.

“It depends on so many factors, how the international situation develops. It is a very dynamic world and we will have to deal with it as the situation unfolds.”

By Shivani Khanna

A woman who believes in equal rights and aspires to inspire people through her writings. I aspire to contribute to the economic world and society with diligence and thus being an economic advisor tops my career ambitions . I currently am pursuing Economic honours ( at undergrad level) from delhi university.