An Increase In The Number Of Covid Cases Is Posing A Big Threat To The Indian Economy

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Image Credit – Times Of India


There has been a rapid increase in the number of Covid cases and it is the single most challenge that is getting bigger with each day. The ongoing recovery of the Indian economy is threatened by the surge in the number of Covid cases, according to Shaktikanta Das, the governor of RBI. He has asserted the fact that the learning from the previous year is however going to help in managing the crisis as it is going to unfold day by day.

During the minutes of the Monetary Policy Committee (MPC), on Thursday, the RBI governor has said that to effectively secure the economic recovery is the need of the hour and things are underway so that it becomes durable and broad-based. There has been a renewed surge in Covid infections as several parts of India are hit by the dreaded outcomes. The associated regional and localized lockdowns have added an aura of uncertainty to the growth outlook.

Shaktikanta Das further added that in such an environment, the monetary policy should be kept in such a way that it should be accommodative to nurture, support, and consolidate the recovery. The economy must continue to sustain the impulses of growth as part of the new financial year in 2021-22. He also spoke in support of maintaining the policy rate unchanged and believe in continuing with an accommodative stance so that growth can be sustained on a long-term and durable basis. It has also ensured that the inflation has remained within the parameters of the target while moving forward.

Quite expectedly, the rates have been kept on hold by the RBI and it has also surprised the markets by announcing a government bond purchase program of Rs. 1-lakh-crore. This has helped in bringing down the interest rates. Although the accommodative stance is reiterated by the RBI, while it has announced the MPC decision, the reading of the minutes has briefly emphasized the dovish stance that has been taken by the RBI.

While moving forward, ample surplus systematic liquidity has been ensured by the RBI. It will also maintain the system in surplus after meeting all the requirements of the financial market segments as well as the economy’s productive sector. This has been added by Das during the minutes of the meeting.

Ha has also added that the indicators have been suggesting that the real GDP has evolved on the lines of the MPC resolution held in February.

Das has also cautioned about the fact that the investment enhancing measures and improving the demand conditions by the government and also trying to improve the external demand is going to impart an upside to all the growth prospects. There has been a jump in the number of Covid infections recently and it has created a huge impact on Indian economic activity. Nevertheless, the government along with the RBI must handle all the matters very carefully.