Economy poised for ‘glorious summer’: RBI

Tribune News Service

New Delhi, January 21

The Reserve Bank of India has promised a ‘glorious summer’ on the basis of the recent high frequency indicators.

“The recent shifts in the macroeconomic landscape have brightened the outlook, with GDP in striking distance of attaining positive territory and inflation is easing closer to the target. Financial markets remain ebullient with strong portfolio inflows and India is on track for receiving record annual inflows of foreign direct investment,” noted the apex bank’s monthly statement.

It noted that the new year began with countries across the world in a massive vaccination drive, and felt “the worst is behind us”.

“Recent high frequency indicators suggest that the recovery is getting stronger in its traction and soon the ‘winter of our discontent will be made glorious summer’,” said the RBI, quoting William Shakespeare.

“Recent shifts in the macroeconomic landscape have brightened the outlook, with GDP in striking distance of attaining positive territory and inflation easing closer to the target. If these movements sustain, policy space could open up to further support the recovery,” the RBI added.

“In fact, the number of e-way bills issued during December 2020 was the highest, suggesting that the recovery is no longer aloft on the fleeting tailwinds of festival spending but is rising Phoenix-like on the wings of an intrinsic momentum,” said the RBI.

The apex bank went on to add that the labour market conditions were improving gradually and the participation rate had recovered. With the gradual lifting of inter-state movement restrictions, labour force participation rates across most states had picked up to around pre-pandemic levels, the RBI added.

“The need to kick-start investment is acquiring urgency to secure a durable turnaround and a sustainable growth trajectory,” said the report while warning that the stress in the financial sector’s balance sheet could intensify as the camouflage of moratorium, asset classification standstill and restructuring fades.

But banks had entered the health crisis with stronger capital buffers than the global financial crisis, it concluded.

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