Reserve Bank Governor Shaktikanta Das on Monday said the government will have to use structural reforms to revive demand and support the sagging economy, and green shoots of the recovery visible now need to be sustained to pull India out of its worst slowdown in 11 years.
In an interview with PTI, he said the fallout of the outbreak of coronavirus in China needs to be closely monitored by “every policymaker” to tailor a swift response.
While Finance Minister Nirmala Sitharaman’s Budget for 2020-21 and recent steps have created a facilitating eco-system for reviving demand and consumption, it is necessary to undertake land and labour reforms, bring efficiencies in agri marketing and focus on skill development, he said.
Das said the RBI saw an imminent slowdown in growth early in 2019 and used the space that was opened up by the moderation in inflation to cut interest rates on five consecutive occasions.
He cited global trade and business uncertainties together with sluggish domestic demand leading to lower capacity utilisation at factories and twin balance sheet crisis of rising non-performing assets (NPAs) or bad loans on the one hand, and heavily indebted corporates on the other, for the slowdown in the economy.
“There are certain positive evidences visible ... Things slightly picking up but we have to wait and see whether these positive trends are sustaining themselves and we have to see how durable they are,” he said.
He refused to say if the growth slowing down to 4.5 per cent in July-September was the bottom of the pit that the economy can see. “As I have said there are evidences of positive developments. But we have to see how durable are these positive developments before we pass a judgment that from here on it is an upward trajectory.”
“By and large, if you look at our projection which we have given, things should start improving in the next financial year. For next financial year, we have projected 6 per cent of GDP growth against 5 per cent for the fiscal that ends in March.”
The GDP growth in October-December is expected to drop below its previous quarter rate of 4.5 per cent despite a slight recovery in industrial production and positive manufacturing PMI.