1/22/2021 RBI sees V-shaped recovery, likely room for policy easing - Times of India

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RBI sees V-shaped recovery, likely room for policy

easing
TNN | Jan 22, 2021, 01.32 AM IST

MUMBAI: Forecasting a V-shaped recovery, Reserve Bank of India has

said that if growth momentum continues and inflation stays benign there
would room for policy action to support growth.
This observation comes in the central bank’s State of the Economy report
released on Thursday. This comes at a time when the central bank has
started 'normalising’ the liquidity in the money markets by draining out the
surplus it had pumped in to stave off an economic crisis in the wake of the
Covid-19 pandemic.

“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. If these movements sustain, policy
space could open up to further support the recovery,” RBI said in the
report.

Stating that the worst of the Covid-19 crisis is now behind RBI quoting William Shakespeare wrote: “Recent high-frequency
indicators suggest that the recovery is getting stronger in its traction and soon the winter of our discontent will be made
glorious summer,”.

The report states that consumer confidence is expected to improve from January 2021, peak in July 2021 and continue till
September ahead of the next festival season

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1/22/2021 RBI sees V-shaped recovery, likely room for policy easing - Times of India

“Going forward, two positive features are going to shape up the fiscal landscape in H2. First, the general government gross
fiscal deficit to GDP ratio is likely to moderate to 10.4%. This development will be revenue-driven as the war effort of H2 bears
fruit and receipts return to positive territory. Second, the quality of the fiscal deficit is also likely to be better in H2,” the report
said.

The RBI also sees a revival in non-oil exports due to rise in shipments of drugs and pharmaceuticals, agricultural items and iron
ore. “India is already manufacturing 60 per cent of the vaccines sold globally. Furthermore, the production linked incentive (PLI)
scheme introduced for bulk drugs and medical devices has received a positive response and is expected to support
pharmaceutical and medical exports going forward,” RBI said.

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