Tag: michael debabrata patra

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Mumbai: The economy is gaining traction with gradual pick up in manufacturing activity and moderation in contraction of services, spurred by comfortable liquidity conditions, an RBI article on Tuesday said.

Observing that the retreat of the second wave of coronavirus pandemic has been slow, the RBI in an article on the ‘State of Economy’ said, the aggregate demand conditions are buoyed by the release of pent-up demand post unlock, while the supply situation is improving with the monsoon catching up to its normal levels and sowing activity gaining pace.

“Reaffirming the traction that the economy is gaining, the manufacturing activity is gradually turning around, while contraction in services has moderated. Spurred by comfortable liquidity conditions, financial conditions stay benign and supportive of the recovery,” it said.

The article notes that with the cautious unwinding of restrictions by states, human mobility has risen to levels last seen in February 2021, prior to the onset of the second wave. Electricity generation readings, too, have recovered to peak levels seen in April 2021 and are closing on to the pre-pandemic level (July 2019).

It has been authored by team lead by RBI deputy governor Michael Debabrata Patra. The central bank said views expressed in the article are those of the authors and do not necessarily represent the views of the RBI. E-way bill collections rose to their highest level in the last four months, clocking a growth of 17.3% sequentially over June 2021. Normalised to February 2020 levels, E-way bills, both intra-state and interstate, surpassed pre-pandemic levels. In August so far (up to August 8, 2021), daily average E-way bills declined sequentially by 5.8%, with implications for GST collections going forward.

Also toll collections rebounded in July, nearing the March 2021 record when Fastag was made mandatory. As per the article, fuel consumption recorded an uptick in July 2021. While the consumption of petrol reached pre-pandemic levels and aviation turbine fuel (ATF) recorded a sequential improvement, diesel consumption slipped marginally.

On the price rise front, the article said the headline CPI inflation for July 2021 came in at 5.6%, down 70 bps from 6.3% a month ago and “reinforcing the view that the recent upsurge has peaked and the worst would be behind us”. Further, high frequency food price data from the department of consumer affairs indicate an uptick in cereal prices in August so far. Prices of pulses, on the other hand, continue to soften. Edible oil prices are seeing some pressures. Among key vegetables, prices of potatoes, onions and tomatoes saw some seasonal increase in prices, it said. On the the recent enactment of amendments to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, the article said it is a major step towards ameliorating depositor distress. agencies



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Banking & Finance

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Only private investment is “missing in action” at a time when all engines of aggregate demand are starting to fire to boost economic growth, according to a Reserve Bank article. Observing that there is little doubt today that a recovery based on a revival of consumption is underway, the RBI in the recent article said, “the jury leans towards such recoveries being shallow and short-lived”.

The key to whet the appetite for investment, it said, is to rekindle the animal spirits, a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.

“All engines of aggregate demand are starting to fire; only private investment is missing in action. The time is apposite for private investment to come alive,” said the article prepared by RBI Deputy Governor Michael Debabrata Patra and other officials.

The article published in the RBI Bulletin- February 2021 further said “the time is apposite” for private investment to come alive.

Fiscal policy, with the largest capital expenditure (capex) budget ever and emphasis on doing business better, has offered to crowd it in.

“Will Indian industry and entrepreneurship pick up the gauntlet?,” it said.

The Indian economy is estimated to contract by 8 per cent during the current financial year on account of the impact of the COVID-19 pandemic. The economy is expected to stage a V-shape recovery in the next fiscal and record double-digit growth.

An another article ‘Sectoral Deployment of Bank Credit in India: Recent Developments’ published in the Bulletin said that the muted credit offtake in the recent past needs to be seen in the context of economic slowdown coupled with the COVID-19-induced lockdown.

The RBI said the views expressed in the articles are those of the authors and do not necessarily represent the views of the Reserve Bank of India.

Bank credit growth, which had already started decelerating in 2019-20, experienced a further setback in 2020-21 in the wake of the pandemic.

However, with the gradual resumption of economic activity, credit to agriculture and services sectors has registered accelerated growth in the recent period, it said. Even in the industrial sector, credit growth to medium industries has accelerated, indicative of positive impact of several measures taken by the government and the Reserve Bank of India (RBI).

“However, contraction in credit to large industries and infrastructure remains a cause of concern,” it said.

The Reserve Bank has taken several measures to facilitate credit flow to various sectors of the economy, especially to the MSME and NBFC sectors.

Credit offtake is expected to pick up as the economy is poised to stage a smart recovery in 2021-22 on the back of decline in coronavirus infections and swift roll-out of the vaccination programme. This is in addition to a number of measures announced by the government in the Union Budget 2021-22 to accelerate the growth momentum, the article said.

As per the article, the recent decline in credit growth was mainly due to large industries.

“Owing to the stressed assets in large industries, there was a general reluctance on the part of bankers to lend to these industries, with the problem getting compounded by the pandemic,” it said.



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India’s GDP is within the striking distance of attaining positive growth, the Reserve Bank said observing that the letter “V” in the V-shaped recovery stands for vaccine. The Indian government launched the world’s biggest vaccination drive on January 16 to protect people from COVID-19.

“What will 2021 look like? The shape of the recovery will be V-shaped after all and the ‘V’ stands for vaccine,” said an article on the ‘state of economy’ in the RBI‘s January Bulletin.

India has launched the biggest vaccination drive in the world, backed by its comparative advantage of having the largest vaccine manufacturing capacity in the world and a rich experience of mass inoculation drives against polio and measles.

“If successful, it will tilt the balance of risks upwards,” said the authors who among others include RBI Deputy Governor Michael Debabrata Patra.

The RBI, however, said the views expressed in this article are those of the authors and do not necessarily represent the views of the central bank.

E-commerce and digital technologies will likely be the bright spots in India’s recovery in a world in which there will be rebounds for sure, but pre-pandemic levels of output and employment are a long way off, they said.

The article further said: “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.”

India’s GDP is estimated to contract by a record 7.7 per cent during 2020-21 as the COVID-19 pandemic severely hit the key manufacturing and services segments, as per government projections released earlier this month.

The economy contracted by a massive 23.9 per cent in the first quarter and 7.5 per cent in the second quarter on account of the COVID-19 pandemic.

The article further said that in the first half of 2021-22, GDP growth will benefit from statistical support and is likely to be mostly consumption-driven.

With rabi sowing surpassing the normal acreage way before the end of the season, bumper agriculture production is expected in 2021.

“India being the global capital for vaccine manufacturing, pharmaceuticals exports are expected to receive a big impetus with the start of vaccination drives globally. Agricultural exports remain resilient and under the recent production linked (PLI) scheme, food processing industry has been accorded priority,” it said.

Harnessing the synergies by transforming low-value semi-processed agri products through food processing would not only improve productivity but also boost India’s competitiveness, it added.

The article notes that slippage ratios have been falling and loan recoveries are improving even as provisioning coverage ratios have risen above 70 per cent. Capital infusion and innovative ways of dealing with loan delinquencies will occupy policy attention in order to ensure that finance greases the wheels of growth on a durable basis before the demographic dividend slips away.

“It will take years for the economy to mend and heal, but innovative approaches can convert the pandemic into opportunities. Will the Union Budget 2021-22 be the game-changer?,” it said.

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget in Lok Sabha on February 1.



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