Downside risks to growth continues due to recent surge in COVID-19 infections : RBI Gov

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Biznextindia : While the Indian economy has exhibited stronger than expected recovery in the Q2 after contracting 23.9 per cent in Q1,we need to be watchful about the sustainability of demand after festivals and a possible reassessment of market expectations surrounding the COVID-19 vaccine, said RBI Governor Shaktikanta Das.

Delivering the keynote address at the 4th annual day of the Foreign Exchange Dealers Association of India (FEDAI), he said that even as the growth outlook has improved, downside risks to growth continue due to recent surge in infections in advanced economies and parts of India.

The monetary policy guidance in October emphasised the need to see through temporary inflation pressures and also maintain the accommodative stance at least during the current financial year and into the next financial year.

“After witnessing a sharp contraction in GDP by 23.9% in Q1:2020-21 and a multi-speed normalisation of activity in Q2, the Indian economy has exhibited stronger than expected pick up in momentum of recovery. The global economy has also witnessed a stronger than expected rebound in activity in Q3. The IMF has accordingly revised its assessment for global growth in 2020 to a less severe contraction than what was assessed in June 2020” he said.

“A key source of resilience in recent months has been the comfortable external balance position of India supported by surplus current account balances over two consecutive quarters, resumption of portfolio capital inflows on the back of robust FDI inflows, and sustained build-up of foreign exchange reserves. The Government’s recent policy focus to enhance India’s participation in global value chains, including through production linked incentives for targeted sectors, can leverage on the strong external balance position of India”.

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