INSUBCONTINENT EXCLUSIVE:
RBI has noted that second wave of pandemic has hit domestic demand the mostThe Reserve Bank of India (RBI) has observed that the Indian
economy continues to wrestle with the second wave of Coronavirus pandemic even though cautious optimism is returning
It has assessed that the second wave has basically hit domestic demand hard.In its monthly bulletin for June 2021, the central bank has
focussed on the overall state of the economy, India's sovereign yield curve and the fiscal framework of the country, in the form of three
articles.Commenting on the state of the economy, the central bank has said that while the second wave has hit domestic demand, on the
brighter side, several aspects of aggregate supply conditions - agriculture and contactless services are holding up, while industrial
production and exports have surged compared to last year amidst pandemic protocols."Going forward, the speed and scale of vaccination will
shape the path of recovery
The economy has the resilience and the fundamentals to bounce back from the pandemic and unshackle itself from pre-existing cyclical and
structural hindrances," it said.In the macroeconomic view of India's sovereign yield curve, RBI found that the level of the yield curve has
undergone a downward shift from the second quarter of 2019, reflecting the ultra-accommodative stance of monetary policy.On the fiscal
framework and quality of expenditure in India, the RBI noted in its study that the Coronavirus pandemic necessitated an overwhelming fiscal
response from governments across the world."As India unwinds the fiscal stimulus and embarks on the path of fiscal adjustment, it is
necessary to emphasise on ‘how' over ‘how much'
This article proposes a few quantifiable indicators, i.e. ratios of revenue expenditure to capital outlay and revenue deficit to gross
fiscal deficit along with threshold levels for them, that can be suitably blended into the fiscal fabric for a sustainable growth
trajectory," the RBI bulletin has noted.
