Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday said that the Indian economy has exhibited a stronger-than-expected rebound over the past few months but added that institutions need to be watchful of demand sustainability after the festive season.
It can be noted that India’s economy contracted by 23.9 per cent in the first quarter of the financial year, and the central bank expects it to shrink by 9.5 per cent in FY21. However, there has been recovery after the easing of the lockdown restrictions, especially during the festive season.
“After witnessing a sharp contraction in the economy by 23.9 per cent 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.
The RBI governor was delivering a keynote address at Foreign Exchange Dealers’ Association of India’s (FEDAI’s) Annual Day programme.
“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 in his address.
Das said that the RBI remains committed to maintain the orderly functioning of financial markets and added that the central bank will act to mitigate any downside risks. He further said that capital account convertibility will continue to be approached as a process, rather than as an event.
“Our approach over the last few years has been to increase interaction with financial market players,” the RBI governor said in his speech and added the regulatory reforms have moved the financial markets to the next trajectory amid the pandemic and affirmed the central bank’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.
–with inputs from PTI
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