On road to recovery despite headwinds: RBI : The Tribune India

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On road to recovery despite headwinds: RBI

Reserves robust, will withstand global spillovers

On road to recovery despite headwinds: RBI

Despite several negative factors, the RBI is confident that robust reserve buffers, strong FDI pipeline, healthy merchandise exports and participation in global value chains should help the Indian economy withstand adverse global spillovers.



Tribune News Service

New Delhi, May 27

Despite several negative factors, the RBI is confident that robust reserve buffers, strong FDI pipeline, healthy merchandise exports and participation in global value chains should help the Indian economy withstand adverse global spillovers.

The future path of growth will depend on addressing supply-side bottlenecks, calibrating monetary policy to control inflation and supporting growth by boosting capital spending, said the central bank while dwelling on future prospects in its annual report released on Friday.

It felt the government would need to implement more supply-side policy interventions in addition to its recent initiatives which included scrapping import duty on raw cotton, banning wheat and sugar exports, reducing taxes on fuel, revising import and export duties on steel and plastics, and nil duty on crude sunflower and soybean oil.

At the same time, it warned that longer-than-expected supply chain bottlenecks, high freight and inflation would continue to pose significant risks though direct trade and finance exposure in the context of the Ukraine conflict were limited. But high crude oil prices can widen the current account deficit and foreign portfolio investors may remain risk averse towards emerging market economies, including India.

Though the banking sector’s financial parameters improved, it has to be wary of the credit behaviour of restructured advances and possibility of increased slippages from sectors more exposed to the pandemic. “With the unwinding of support measures, some of the restructured accounts might face solvency concerns, with the impact on banks’ balance sheets becoming clearer in the upcoming quarters,” it cautioned while calling for proactive identification of accounts in trouble.

NBFCs and urban cooperative banks too would have to watch their balance sheets and improve the quality of their credit portfolios. As NBFCs have been major recipients of credit, “continued attention to their financial health is warranted”.

“But the economic recovery is underway despite the headwinds,” summarised the report.

Structural reforms the key: annual report

  • Undertaking structural reforms to improve India’s medium-term growth potential holds the key to sustained and inclusive growth
  • There exists a risk of high Wholesale Price Inflation putting pressure on the retail inflation

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