With tapering of second wave, near-term prospects of economy seem bright: RBI

The tapering of the second wave has brightened near-term prospects for the Indian economy.

On 15th July the Reserve Bank of India Bulletin for July mentioned that coupled with an aggressive vaccination push, the tapering of the second wave has brightened near-term prospects for the Indian economy, as mentioned in a report released by Moneycontrol.

The bulletin mentioned that a solid increase in the aggregate demand is yet to take shape while several high-frequency indicators of activity are recovering.

Due to the second wave, the recovery of the manufacturing and services sector has been interrupted although the agricultural conditions are turning buoyant with the revival in monsoon, on the supply side.

By sector, specific demand-supply mismatches caused by the pandemic and adverse supply shocks have driven a pick up in inflation largely. As supply-side measures to take effect, these factors should ease over the year, the bulletin further said.

In the total floating rate loans, the share of outstanding loans which are linked to external benchmark has increased from as low as 2.4% during September 2019 to 20 8.5 % by the end of 2020-21, as suggested by the data collected from banks, according to the bulletin.

For a quicker adjustment in deposit rates, the market impulses have been strengthened by the adoption of external benchmark-based pricing of loans, the bulletin added.

Maintaining the status quo along with keeping the stance accommodative was decided in June by the central bank’s monetary policy committee, in line with expectations.

 

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