Despite rising Covid cases lockdowns are unlikely: RBI Guv

The rising COVID-19 infections across the country are a matter of concern, but it may not impact the ongoing economic revival as one does not foresee lockdowns, Reserve Bank Governor Shaktikanta Das said on Thursday.

The economic revival will continue "unabated", Das said, asserting that there is no need for a downward revision of RBI's 10.5 per cent GDP growth forecast for FY22.

Speaking at Times Network's India Economic Conclave, Das said, "We have 'insurance' to protect economic revival like a fast-paced vaccination drive, greater ability among people to follow COVID protocols", and one does not see lockdowns as well.

"The renewed surge in COVID cases in many parts of the country is a matter of concern," the governor said.

"I would feel that the revival of economic activity, which has happened, should continue unabated going forward.

"My understanding and our preliminary analysis shows that the growth rate next year – the 10.5 per cent which we had given – would not require a downward revision," he added.

It can be noted that India reported over 50,000 new COVID-19 infections on Wednesday with states like Maharashtra reporting newer highs, and a new strain of virus has also been found.

Some pockets of the country have already resorted to stricter lockdowns in the face of the rising infections.

It can be noted that a nationwide lockdown last year led to a deep economic impact and the GDP is set to contract by over 7 per cent in FY21.

"...at this point of time, one does not forsee a kind of lockdown that we experienced last year. Last year, it came as a huge shock," Das said.

The governor affirmed the central bank's commitment to use all its policy tools to facilitate the economic revival from the debilitating impact of the pandemic while ensuring price and financial stability.

It can be noted that after deep rate cuts initially, the RBI has been focusing on a slew of measures uncharacteristic policy measures to help the economic revival as inflation – its primary objective – became into a point of concern.

Das declined to comment on the inflation trajectory he sees going ahead, asking everybody to wait for the resolution of the Monetary Policy Committee early next month which will have the RBI's outlook.

On the future of the 'V-shaped' growth recovery, he made it clear that the RBI had never used any alphabet to denote the recovery but came out with a number, which is being maintained.

When asked about the bond market, Das said the central bank and the market are in no fight and added that the relationship should be non-combative. He, however, added that the RBI would like for an orderly evolution of the yields curve and no sudden spikes.

The RBI does not want excessive volatilities in the forex market and has been accumulating reserves to protect against the possible impact of the withdrawal of the stimulus measures in advanced economies, Das said.

At present, India's forex reserves are sufficient to cover for 18 months of imports but there is no level of the reserves which the RBI is tracking, Das said, committing to keep the rupee stable.

Das said in the year of the pandemic, India processed 274 crore direct benefit transfer transactions to help the pandemic-affected population.

He said real time gross settlement (RTGS), which is used to transfer large sums of money, has multi-currency capabilities and there is also a scope to explore if its footprint can be expanded beyond the country.

Das said there are no differences with the government over cryptocurrencies and the RBI has conveyed major concerns on the same to the government, which will eventually take a decision on the matter.

Financial sector stability is a major cause of worry which is being assessed as the RBI works on the central bank's digital currency, he said.

Das affirmed that the RBI does not wish to hurt innovation done by the financial technology players and will keep its regulations in sync with their work.

When asked about the budget proposal to privatise two state-run lenders, Das said there had been discussion between the Mint Street and North Block before the budget and after it as well, and added that the process is moving ahead.

The RBI sees the banking landscape divided into four in the future, which will include a few large banks having a pan-India and also foreign presence, some mid-size lenders, small sized banks and the last category will be digital players, he said.

Maintaining health of the banking sector with a strong capital base and ethics-driven compliance culture remains a policy priority for the RBI, he said, adding that the RBI has taken a slew of measures to improve governance at the urban cooperative banks.

Photograph: PTI Photo