RBI chief calls for targeted infra push to reignite economy

Our Bureau New Delhi | Updated on July 27, 2020 Published on July 27, 2020

RBI Governor Shaktikanta Das   -  PTI

Says fortunes shifting in favour of farm sector

Reserve Bank of India (RBI) Governor Shaktikanta Das on Monday called for a big push to targeted mega infrastructure projects as these can reignite the economy. He also assured India Inc for all required support from the RBI.

On targeted infrastructure projects, he said: “This could begin in the form of a north-south and east-west expressway together with high-speed rail corridors, both of which would generate large forward and backward linkages for several other sectors of the economy and regions around the rail/road networks.”

He felt that both public and private investment would be key to financing infrastructure projects. According to estimates of NITI Aayog, the country would need around $4.5 trillion for investment in infrastructure by 2030.

Responding to queries from industry captains, Das made it clear that central banks do not have a fixed target on the dollar/rupee level. “We only prevent volatility in the forex market,” he said.

In one of the interventions, HDFC’s Deepak Parekh suggested RBI purchase corporate bonds directly, but Das made it clear existing laws do not permit such an action. He also said that renewed activity has been perceived in the bond market. Corporate bond issuance was about ₹1-lakh crore in the first quarter, he said, while noting the suggestion for extending the moratorium.

Atul Punj of Punj Lloyd complained that there have been cases when banks walked out in the middle (of projects) making things difficult for the particular company, and giving rise to the possibility of that account turning a non-performing asset (NPA). The Governor admitted that there could be some such cases. Though the central bank cannot take individual cases, it can try to deal with and resolve such problems in a generalised manner. He also said that banks will have to evaluate credit risks involved in various investments they make and take their own decisions.

Five dynamic shifts

Earlier, in his opening remarks, Das touched upon five dynamic shifts that are underway in the Indian economy. “They may escape our attention in this all-consuming engrossment with the pandemic, but they could be nursing the potential to repair, to rebuild and to renew our tryst with developmental aspirations,” he said. These five dynamic shifts are ― fortunes shifting in favour of the farm sector, changing energy mix in favour of renewables, leveraging information and communication technology (ICT), start-ups to power growth, shifts in supply/value chains, both domestic and global, and infrastructure as the force multiplier of growth.

Stating that recent agriculture reforms have opened up new opportunities, the RBI Governor said Indian agriculture has witnessed a distinct transformation. Total production of food grains reached a record 296 million tonnes in 2019- 20, registering an annual average growth of 3.6 per cent over the last decade. Total horticulture production also reached an all-time high of 320 million tonnes, growing at an annual average rate of 4.4 per cent over the last 10 years. India is now one of the leading producers of milk, cereals, pulses, vegetables, fruits, cotton, sugarcane, fish, poultry and livestock in the world. Buffer stocks in cereals currently stand at 91.6 million tonnes or 2.2 times the buffer norm. “These achievements represent, in my view, the most vivid silver lining in the current environment,” he said.

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Published on July 27, 2020
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