The Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday said that there are numerous indicators that suggest that economic recovery is now taking hold, but for the growth to be sustainable and reach its potential, investment in private capital has to resume.
Crediting the faster-than-expected recovery primarily to the improved vaccination pace and the resultant steady fall in the infection caseload, Das said this has led not only to lower extreme health outcomes like mortality/ hospitalisation but also boosted consumer confidence, which was visible in the festival demand.
Addressing a State Bank event – Banking & Economics Conclave 2021 — which he dubbed as the first one after the March 2020 lockdowns — Das said it is heartening to note that the economy is gradually getting back on its feet after the devastating second wave, which is very visible from the numerous high-frequency indicators that suggest that economic recovery is taking hold.
Since contact-intensive services are yet to regain the lost capacity despite rapid improvement in the recent period, it is clear that there still exists a significant gap in private consumption and investment relative to their pre-pandemic levels in FY20.
So, while the economy is picking up pace, it is yet to cover a lot of ground before it gets broad-based and entrenched. This points to the need for sustained impetus so that growth could return to or, better still, exceed the pre-pandemic trend, he said.
Stating that the country has the potential to grow at a reasonably high pace after the pandemic, Das pointed to the several factors that are stacked in our favour of faster growth.
First, as a developing economy, it has significant potential to catch up with the rest of the world supported by favourable demographics, improving skill base and strong domestic demand.
Secondly, the government is providing necessary support, especially through Capex and reforms in various sectors.
Thirdly, he said the pandemic has opened new opportunities for growth in the digital and green technology and also on account of resetting of global supply chains and exports too have been a bright spot.
