Economic recovery stronger than expected, RBI Governor Das

Reserve Bank of India (RBI) Governor Shaktikanta Das has said that the country’s economy has recovered stronger than expected from the initial impact of the Covid-19 pandemic, but there is a need to be watchful of demand sustainability after the end of festivities. Speaking at the annual day event of Foreign Exchange Dealers’ Association of India (FEDAI) on Thursday in Mumbai, Das said there are downside risks to growth across the world and also in India.

“After witnessing a sharp contraction in the economy by 23.9% in Q1 and a multi-speed normalisation of activity in Q2, the Indian economy has exhibited stronger than expected pick-up in momentum of recovery,” Das said. Even as growth outlook has improved, downside risks to growth continue due to recent surge in infections in parts of Europe and also in parts of India, he said. “We need to be watchful about the sustainability of demand after the festivals and a possible reassessment of market expectations surrounding the vaccine,” he said.

Das said regulatory reforms have moved the financial markets to the next trajectory amid the pandemic and affirmed RBI’s commitment to ensure an orderly conduct in the markets. He also said that India will continue to approach capital account convertibility “as a process, rather than as an event” within a broad macroeconomic framework.

It can be noted that the Indian economy contracted by 23.9% in the first quarter of the fiscal year, and the RBI expects the economy to shrink by 9.5% in FY21. However, there has been recovery after the opening up of the lockdown restrictions, especially during the festive season.