According to State of the Economy report released by Reserve Bank of India, there is going to be enough scope for supporting growth through policy action if the growth momentum does not recede and inflation continues to undergo minimal hike. It is important to note that the central bank’s assessment comes on the heels of its new measures directed at draining out the surplus liquidity that was pumped in to ward off an economic crisis when the Covid-19 pandemic was at its peak.
“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.
Acknowledging that the country has now left the worst of the crisis behind, RBI said, “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 anticipates customer confidence to improve exponentially from this month to July and continue to replenish till September.
“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 per cent. 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 central bank has also predicted that non-oil export will improve owing to the increase 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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