Recovery’s momentum stronger-than-expected, says RBI Chief Shaktikanta Das

Need to watch demand stability amid downside risks from COVID-19 surge, he says.

India’s economy has exhibited a stronger-than-expected pick up in momentum of recovery following a multi-speed normalization of activity in the second quarter, Reserve Bank of India Governor Shaktikanta Das said on Thurday.

Also read: Do recent indicators hint at a real economic revival?

“The global economy has also witnessed a stronger than expected rebound in activity,” Mr. Das said at a Foreign Exchange Dealers’ Association of India (FEDAI) event. “The IMF has accordingly revised its assessment for global growth in 2020 to a less severe contraction than what was assessed in June,” he added.

The RBI chief, however, cautioned that even as the economic outlook had improved, downside risks to growth continued due to a recent surge in COVID-19 infections in advanced economies and parts of India.

Post-festival activity

“We need to be watchful about the sustainability of demand after festivals and a possible reassessment of market expectations surrounding the vaccine,” he stressed.

Also read: Editorial on festivals amid pandemic | A critical season

“The monetary policy guidance in October emphasized the need to see through temporary inflation pressures and also maintain the accommodative stance at least during the current financial year and into the next” fiscal, he added.

Mr. Das said a key source of resilience had been the comfortable external balance position supported by surplus current account balances over two successive quarters, resumption of portfolio capital flows on the back of robust FDI inflows, and sustained build-up of foreign exchange reserves.

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