Tribune News Service
New Delhi, October 9
While keeping the benchmark interest rate unchanged, the Reserve Bank of India (RBI) on Friday announced several additional measures to revive the economy, including a Rs 1 lakh crore liquidity chest for banks for lending via bonds and commercial papers in specific sectors.
Addressing a press conference after the three-day meeting of the reconstituted Monetary Policy Committee (MPC), RBI Governor Shaktikanta Das gave an insight into the government’s thinking about reviving the economy.
“In my view, it is likely to be a three-speed recovery with individual sectors showing varying paces, depending on sector-specific realities.”
The sectors that would open their accounts first are agriculture and allied activities; FMCG; two-wheelers, passenger vehicles and tractors; drugs and pharmaceuticals; electricity generation, especially renewable.
The RBI has also decided to revise the differential risk weights applicable to individual housing loans, based on the size of the loan as well as the loan-to-value ratio (LTV). The RBI will maintain comfortable liquidity conditions and will conduct market operations in the form of outright and special open market operations of Rs 20,000 crore each.
The RBI chief had harsh words for a section of the industry and announced steps to improve the flow of credit to specific sectors while maintaining credit discipline. He also unveiled steps to boost exports, deepen financial inclusion and provide more credit to the SMEs.
Inflation, according to the MPC with Ashima Goyal, Jayanth Varma and Shashanka Bhide as the new external members, will remain elevated but ease gradually towards the target by next March. Supply disruptions and associated rise in costs are the major factors driving up inflation. As supply chains were restored, these wedges should dissipate, it observed.
Das spoke of the Indian economy entering into a decisive phase in the fight against the pandemic as several high-frequency indicators point to the easing of contractions and the emergence of growth impulses.
Kharif sowing especially had surpassed last year’s acreage while improved soil moisture conditions, along with healthy reservoir levels, have brightened the outlook for the Rabi season. Early estimates suggest that foodgrain production is set to cross another record in 2020-21.
With migrant labour returning to work, factories and construction activity is coming back to life. This is reflected in the rising levels of energy consumption and population mobility.
“The mood of the nation has shifted from fear and despair to confidence and hope,” he noted.
Touching on the raging debate on the type of recovery expected — V, U, L, W or even K —Das said sectors that were resilient and labour-intensive would be the first to do well.
In several of these areas, agricultural marketing reforms, accent on value chains encompassing cold storage, transport and processing and changes in labour laws will attract fresh investment.