The Indian economy had tremendous potential and would certainly recover from the present downturn, Reserve Bank of India Governor, Shaktikanta Das has said.
“We all need to act together and act in time,” the central bank head emphasised at the National Executive Committee Meeting (NECM) of the industry chamber Federation of Indian Chambers of Commerce & Industry (FICCI) on Wednesday.
Addressing the delegates through video conferencing, Das said, “The enabling policy environment would evolve around the initiatives taken by India’s businesses to seize these opportunities and actualise the potential of the Indian economy as a rising economic power of the 21st century.”
He also outlined key areas that could help India to drive growth.
“India has tremendous scope to capitalise on the new opportunities. The five areas that will determine our ability to sustain India’s growth in the medium-term include human capital in education and health, productivity, exports, tourism and food processing,” he added.
Economic Recovery to Be Gradual
Das said that by all indications, the recovery was likely to be gradual as efforts towards the reopening of the economy were confronted with rising infections. He further urged the industry to play an active role by investing more in R&D. “Government and private sector must work together to enter the global value chain,” he opined.
The RBI governor said that India needed to move up on the global agriculture value chain. Despite being one of the largest food producers, the country’s position in the global value chain was quite low. He further added that food processing was a sunrise industry for India.
Das said that the tourism and hospitality sector was impacted more by COVID-19 but also expressed hope that it would see an early recovery.
“Tourism as an engine of growth and pent up demand could drive a V-shaped recovery. Employment elasticity for the tourism sector is also quite high,” he added.
He further said that among the sunrise sectors that offered the potential for higher exports in the post-COVID-19 period are drugs and pharmaceuticals.
“A sharp policy focus on other global value chain intensive network products, including equipment for IT hardware, electrical appliances, electronics, telecommunications and automobiles would also provide the cutting edge to India’s export strategy with considerable scope for higher value additions,” Das added. The governor said that the immediate policy response to the coronavirus pandemic in India had been to prioritise stabilisation of the economy and support a quick recovery. He also stated that with a view to further promoting innovations in financial services, RBI had announced an innovation hub.
“This will focus on new capabilities in financial products and services that can help in deepening financial inclusion and efficient banking services,” he noted.
Dr. Sangita Reddy, President, FICCI said that reviving the economy requires coordinated efforts from all stakeholders including the government, regulators and the industry.
“The RBI stands battle-ready to fight the economic downturn and industry appreciates this and stands alongside in this joint battle,” she noted.
Dr. Reddy further added that although the unlocking phases of the economy had helped to restart of businesses, the damage caused by COVID-19 was colossal and would require a much longer time before improvement was seen on a sustained basis.
“A lot more support is needed to rebuild, restart, revive and sustain businesses, especially in the hard-hit sectors like tourism, aviation, hospitality, retail and healthcare,” she emphasised.
“Credit off-take by the MSMEs under the ECLGS can be considerably increased by making the scheme simpler and expanding its coverage,” she said.
Dr. Reddy added, “We would like to thank the RBI for announcing the much-needed one-time restructuring scheme. We would like a review of the eligibility criteria and timelines laid out under the scheme as we feel that several deserving accounts may not qualify and miss out on this window of opportunity.”
Uday Shankar, Senior Vice President, FICCI said that during the pandemic time, the role of the RBI was to stabilise the entire financial sector and ensure that the revival is faster.