DAILY NEWS ANALYSIS

GS-III : Economic Issues RBI

07 June, 2021
5 Min Read

Consumer Confidence Survey- RBIs policy statement

Consumer Confidence Survey- RBIs policy statement

Introduction

The RBI’s latest policy statement underscores the diminishing options available to it to address the economic fallout from the COVID-19 pandemic.

Accommodative monetary policy

The bank’s Monetary Policy Committee left benchmark interest rates and reiterated that it would keep its policy stance accommodative ‘as long as necessary to revive and sustain growth on a durable basis’.
Since its May 2020 decision to cut interest rates by 40 basis points, taking the cumulative reduction in borrowing costs in the wake of the pandemic’s onset to 115 basis points, the MPC has found itself in a bind.

Economic contraction

While the first lockdown constricted supply and demand for much of Q1 of the last fiscal, pushing the economy into a record 24.4% contraction during April-June and causing full-year GDP to shrink 7.3%, the second wave has crushed all-round demand and consumer confidence.

Consumer Confidence Survey

The RBI’s May round of the consumer confidence survey shows the Current Situation Index at a new all-time low, with 75% of households perceiving the economic and employment situations as having worsened further, and the future expectations index reflecting overall pessimism.
It is hard to see the mere availability of low-cost credit helping revive the all-important consumption demand.

Banking on optimism rather than on data

Banking more on optimism than hard data, the panel bumped up its growth estimates for the second half resulting in an overall cut of only one percentage point to its full-year growth forecast at 9.5%.
- For this, it has assumed rural demand will remain buoyant on the back of an expected normal monsoon, while noting that widespread infections in rural areas, which likely led to a sequential decline in tractor and two-wheeler sales in April, could undermine future demand.
The other factor the RBI is banking on to provide a fillip to economic activity is an accelerated pace of vaccinations, over which it has virtually no control.
To be fair, Governor Shaktikanta Das has used the bank’s liquidity spigot as a tool to address some of the economic distress.
A series of measures focus on bolstering credit flow to the hardest hit MSME and contact-intensive industrial and services sectors, respectively.
With international commodity prices, including crude oil, on an upward trajectory and no signs of domestic policy support to check skyrocketing petrol and diesel pump prices, inflation is sure to accelerate, posing a major conundrum to the RBI.
Raising rates could risk hurting recovery, and not doing so could heighten inflation.

Source: TH

Join Our Telegram

Voice clone-AI

Pradhan Mantri Suryodaya Yojana

06 Feb, 24
SHARE

Recently, Prime Minister announced Pradhan Mantri Suryodaya Yojana under which 1 crore households will get rooftop solar power systems. India’s Status of Current Solar Capacity India currently stands at 4th place globally in solar power capacity. As per Ministry of New an

Foreign Contribution Regulation Act (FCRA)- NGO

06 Feb, 24
SHARE

The Foreign Contribution Regulation Act, 2010 (FCRA) registration of two prominent non-governmental organisations (NGOs) — Centre for Policy Research (CPR) and World Vision India (WVI) have been cancelled this month. What is FCRA? Key provisions of FCRA, 2010 Key aspects Description

Voice clone-AI

06 Feb, 24
SHARE

Voice clone fraud has been on the rise in India. AI voice cloning – It is the process of creating a synthetic replica of a person’s voice through machine learning and speech synthesis technology.It is called as voice deepfakesor audio deepfakes. Objective – To achieve a high level of na

Science communication- how to promote

06 Feb, 24
SHARE

Steps taken by India to promote Science Communication Publications and Information Directorate (PID) - An organisation under Council of Science and Industrial Research (CSIR) established in 1951 for publishing and disseminating scientific information in India. National science magazines- The PI

Universal Basic Income (UBI)- Analysis

05 Feb, 24
SHARE

Universal Basic Income (UBI) can strengthen welfare architecture and unlock the nation’s latent demographic potential. UBI - It is an income support mechanism typically intended to reach all or a very large portion of the population regardless of their earnings or employment status. Objective- To provide enough to co

Quick Links Testimonials FAQ

Crash Course

Regular Modules 2024

Mains

Optional

Consumer Confidence Survey- RBIs policy statement

Pradhan Mantri Suryodaya Yojana

Foreign Contribution Regulation Act (FCRA)- NGO

Voice clone-AI

Science communication- how to promote

Universal Basic Income (UBI)- Analysis

DNA

06 Feb,2024

GS-III

PT Pickups

Toppers

Search By Date

Top Editorials

UPSC Courses

Saarthi Mentorship Programme

Important Tags

Articles:Geography And Environment

Articles: History Culture Society

Articles: Governance & National Issues

Articles: IR & IO

Articles: Economic Development & Economic Issues

Articles: S&T Internal Security

Articles: Ethics & Others

Articles: Others

Newsletter Subscription

SMS Alerts

Important Links