As per the RBI governor, investment, inflation, and lending rates are the key problem areas
GN Bureau | August 30, 2016
Outgoing reserve bank of India (RBI) governor Raghuram Rajan feels that India’s economic growth is below its potential. In a foreword to RBI’s annual report 2015-16, Rajan highlighted what all ails the country’s economy. Rajan’s term ends on September 4.
Rajan stated that while policy actions taken by the government and RBI in restoring macroeconomic stability to the economy have had positive effects, there are a number of areas to be considered “work in progress”. He pointed out three areas of importance, from RBI’s perspective.
“First, economic growth, while showing signs of picking up, is still below levels that the country is capable of. The key weakness is in investment, with private corporate investment subdued because of low capacity utilisation, and public investment slow in rolling out in some sectors. Second, inflation projections are still at the upper limits of RBI’s inflation objective. With the Reserve Bank needing to balance savers’ desire for positive real interest rates with corporate investors’ and retail borrowers’ need for low nominal borrowing rates, the room to cut policy rates can emerge only if inflation is projected to fall further. Third, the willingness of banks to cut lending rates is muted; not only does weak corporate investment reduce the volume of new profitable loans, their stressed assets have tightened capital positions, which may prevent them from lending freely. Certainly, the reluctance to lend to industry and small businesses is more visible among the more stressed public sector banks compared to the private sector banks,” Rajan wrote.
He, however, added that there have been some developments that bode well. They included “expectations of a good monsoon (corroborated thus far) coupled with more money in the hands of government servants (as a result of the implementation of the 7th Pay Commission recommendations)” and also “reforms like the recently passed Goods and Services Tax legislation in Parliament”.
The Murderer, the Monarch and the Fakir: A New Investigation of Mahatma Gandhi’s Assassination By Appu Esthose Suresh and Priyanka Kotamraju HarperCollins, 240 pages, Rs 399 The bloodied shawl has long since faded to a vague brown and now sports
In view of several countries reporting surges in Covid-19 cases and many developed nations facing fourth and fifth waves despite high numbers of vaccinations, the Ministry of Health and Family Welfare has written to the states of Nagaland, Maharashtra, Sikkim, Kerala, Goa, Manipur, Meghalaya, Mizoram, J&am
A few months after the Punjab and Maharashtra Co-Operative Bank Ltd (PMC Bank) was put under moratorium in September 2019, I met an announcer in a function on banking organised by an industry body, with which I have been associated. She was young, pretty beautiful and had a sweet voice and modulation. She
Niti Aayog’s flagship initiative, Atal Innovation Mission (AIM), recently announced to collaborate with Vigyan Prasar, an autonomous organization of the Department of Science and Technology, Government o
In a major development, Uttar Pradesh is poised to become the only state in India to have five international airports, as Prime Minister Narendra Modi is to lay the foundation stone of the Noida Internation
n a recent prestigious event the President of India Ram Nath Kovind felicitated the awardees of the cleanest cities of India at the ‘Swachh Amrit Mahotsav’as part of Swachh