Lifting private consumption, investment & revival of MSME key challenges for policymakers: Deputy Governor RBI

New Delhi, 28 Jan (KNN) Lifting private consumption, investment, and revival of micro small and medium enterprises (MSMEs) remain the key challenges, even as the Reserve Bank of India (RBI) remains committed to fighting the economic disruptions caused by the Covid-19 pandemic, said Michael D Patra, deputy governor at India’s central bank. 

“We are on course to becoming among the fastest-growing economies of the world, but there is far to go. Private consumption and investment are still work in progress. The restoration of livelihoods and the revival of MSMEs is a formidable task that lies ahead,” the deputy governor said on Friday. 

Despite facing the risk of falling behind the curve in raising policy rates amid rising prices, India held its ground and is among a few countries that have continued with accommodative monetary policy to propel growth. In contrast, several emerging market economies are tightening monetary policy and advanced economies are announcing policy normalization in response to rising inflation. 

According to the statement, a wide consultative approach involved reaching out directly to all those entities that had been impacted by the pandemic the most, including small non-banking financial companies (NBFCs) micro finance institutions (MFIs), and even vaccine manufacturers. 

When inducements to banks to lend did not work, the RBI reached out to all India financial institutions to lend to rural and cooperative institutions, MFIs, and HFCs. In subsequent months, this approach led to the fashioning of liquidity lines and regulatory relief to specific sectors identified for restructuring, contact intensive services, individuals, and small businesses.

“The RBI remains committed to reviving and sustaining growth on a durable basis and continue to mitigate the impact of covid on the economy while ensuring that inflation remains within the target going forward,” Patra said. 

He said that holding rates steady and retaining the accommodative monetary policy has served the Indian economy well so far as the economy is poised to grow faster. 

According to RBI’s projection, India's economy will grow at 9.5 percent in FY22. 

By engendering congenial financing conditions, the RBI supported the recovery. Governments of various levels and corporates utilized this opportunity to raise a record volume of resources from financial markets. 

“Only time will tell whether or not India has got it right but so far, this approach has served us well and helped in charting a course into the future which is different from the world,” Patra said while delivering the annual CD Deshmukh Memorial Lecture. 

CD Deshmukh was the first Indian governor of RBI. He later became the Union Finance Minister. 

RBI unleashed a series of measures including some unconventional ones since March 2020 to navigate the economy amid the severe disruptions caused by the Covid-19 virus. 

Patra said that RBI’s measures had contributed significantly to engineering the turnaround in the Indian economy, supported by rising financial inclusion and digitalization. 

“The lessons of the pandemic will be imbibed and the RBI will emerge stronger and more resilient than before, and committed to its mandate of price stability, keeping in mind the objective of growth,” he said.