Ball in government’s court to facilitate economic recovery after RBI hits pause
While the shutdown brought most industries to almost a standstill and depressed demand, it has failed to slow the spread of the coronavirus with the number of infections crossing the 2.2 million mark.Updated: Aug 10, 2020 07:31 IST
With inflation forcing the Reserve Bank of India (RBI) to hold off on further easing of monetary policy, the pressure is now on the government to support an economic recovery amid the fastest rise in Covid-19 cases.
The government is discussing measures to be implemented but is waiting for more signals about the direction the economy is taking, according to five people who are aware of these discussions.
“Presentations are being readied with suggestions and recommendations from ministries for the Prime Minister to consider,” said a senior member of Modi’s council of ministers, one of the five cited above.
The Indian economy is struggling to recover since the government imposed a stringent lockdown in March. While the shutdown brought most industries to almost a standstill and depressed demand, it has failed to slow the spread of the coronavirus with the number of infections crossing the 2.2 million mark. With the gross domestic product (GDP) set to contract by the most since Independence, the government is readying urgent steps to stimulate the economy.
“The next stimulus will be timed after examining the June quarter GDP growth figures—to be released end of August. The focus will be on migrant workers and urban joblessness. Under Atmanirbhar Bharat, more policy reforms may be announced such as production-linked incentive schemes for more consumer goods sectors,” a government official said seeking anonymity.
Businesses are pinning hopes on more demand-boosting measures from the government, including ramping up the execution of infrastructure projects, more economic reforms and a goods and services tax (GST) rate cut if the other steps fail to revive consumption. Business leaders said they are worried about movement curbs imposed by authorities, an issue that was also cited by RBI last week as a reason for several high-frequency economic indicators levelling off.