RBI Says GDP In Striking Distance Of Attaining Positive Territory, Inflation Easing Closer To Target

The Reserve Bank Of India (RBI), stated in a latest monthly update that in India, recent shifts in the macroeconomic landscape have brightened the outlook, with GDP in striking distance of attaining positive territory and inflation easing closer to the target. Financial markets remain ebullient with EMEs receiving strong portfolio inflows and India on track for receiving record annual inflows of foreign direct investment. If these movements sustain, policy space could open up to further support the recovery. In H1:2021-22, GDP growth will benefit from statistical support and is likely to be mostly consumption-driven.

The need to kickstart investment is acquiring urgency to secure a durable turnaround and a sustainable growth trajectory. India must look for ways in which cash sitting idly in balance sheets of corporations and banks and reverse repo balances with the Reserve Bank finds their way into credit to productive sectors and into real spending on investment activity before it imposes a persistent deflationary weight on real activity. However, stress in the financial sector's balance sheet could intensify as the camouflage of moratorium, asset classification standstill and restructuring fades, but banks have entered the health crisis with stronger capital buffers than the global financial crisis.

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