Synopsis–“GDP growth is slowly turning the corner,” RBI governor Shaktikanta Das, chosen as ET’s Business Reformer of the Year by a jury headed by Alphabet CEO Sundar Pichai, said in an interview. He said, “the large capital expenditure announced by the govt will support economic activity and investment.”
The worst is behind for the Covid-ravaged Indian economy and it could go only upwards from here, with government-backed investments crowding in the private sector, though there is a need to be vigilant to ensure that the current increase in infections does not get out of hand, the Reserve Bank of India Governor Shaktikanta Das said.
“GDP growth is slowly turning the corner,” Das, chosen as ET’s Business Reformer of the Year by a jury headed by Alphabet CEO Sundar Pichai, said in an interview. “The large capital expenditure announced by the government will support economic activity and investment. It is expected to crowd in private investment. From now on, the economy is expected to move only in one direction — that is, upwards.”
The Indian economy is forecast to grow 10.5% in the next fiscal after contracting in the current fiscal due to months of lost economic activity on account of lockdowns. While activity has accelerated, the sudden spike in new cases of Covid-19 infections and a surge in prices have brought worries about inflation. “We have to be very watchful of the renewed surge in Covid cases… Hopefully the surge in infections will get contained soon,” Das said.
The RBI is also committed to keeping its easy monetary stance for some time.
Further, rising bond yields across the globe poses challenges to economic recovery, but the central bank is confident that it would be able to manage the government’s borrowing programme smoothly, though investors are worried.
“This year we managed government borrowing in excess of Rs 13 lakh crore,” said Das. “Next year it’s about Rs 12 lakh crore, the net borrowing being Rs 9 lakh crore. We did open market operations of Rs 3 lakh crore this year, we will do equal or more next year depending on the situation… We will continue to support the market while ensuring that the centre and states’ borrowing programmes go through smoothly.”
Das pointed out that the RBI’s job was also to ensure that the borrowing costs for the private sector, which is benchmarked to government securities, were reasonable. “The cost of borrowing for the private sector should be reasonable to support economic revival,” he said.