India is ready for a rapid economic recovery; Festive Period Guarantees Warning: RBI

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India is ready for a rapid economic recovery;  Festive Period Guarantees Warning: RBI

The Reserve Bank maintained the position of interest rates in its October monetary policy.

New Delhi: On Monday, the Reserve Bank of India (RBI) said the country was well on its way to a speedy recovery with growth stimulus spreading to all sectors of the economy. In its economic review for September, the central bank said that “the strategic reforms undertaken so far with new milestones in the vaccine movement have helped the economy to lead the tidal wave of the Govt-19 epidemic.”

The central bank added, “Sustainable growth in agriculture, strong growth in manufacturing and industry, resumption of service activities, moderate revenue collection and improved financial position are evidence of the resilience of the Indian economy.”

The Reserve Bank, however, is cautious during the current festive season. “Eliminating the second wave with the rapid advancement of the vaccine to renew consumer sentiment, the festive period should be cautious and govt-appropriate behavior should continue,” it said.

“The agriculture sector continues to strengthen rural demand by purchasing large quantities of wheat and paddy during the rabi marketing season and the current kharif marketing season, respectively,” the RBI said.

Satisfactory monsoon offers similar benefits in the future.

The central bank said “the continued slowdown in currency growth in circulation since August means that the need for precautionary savings will be reduced by a progressive reopening of the economy.”

Reserve Bank in the equity markets

“The domestic stock market is buoyant with a commitment to global and domestic economic recovery. FPI (Foreign Portfolio Investment) Flows Into the Country, India recorded $ 3 billion higher revenue in September among emerging market economies. So far this fiscal, India has received $ 7.2 billion worth of FPIs. This is the second highest after $ 9 billion in Brazil, according to the Reserve Bank.

“This historic peak expands the base of equity investment in the country with the registration of new demat accounts in the domestic stock market (keeping stocks and securities in digital form).”

Relief for the auto sector?

The Reserve Bank of India has said that the shortage of semiconductor chips will reduce auto sales. Currently, auto retailers are at a huge loss as auto dealers struggle with vehicle shipments to dealerships. “Automobile records and sales are affected by a global shortage of semiconductor chips,” the RBI said in a statement. However, the post-monsoon festive period is expected to increase demand.

Meanwhile, the central bank maintained the position of interest rates in its October monetary policy. The repo rate – the key interest rate at which the Reserve Bank lends to commercial banks – is four per cent, and the reverse repo rate – the borrowing rate from RBI banks – is 3.35 per cent.

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