slowdown blues. RBI Governor calls for coordinated policy action by major economies

The synchronised slowdown across countries necessitates coordinated policy action by major economies, according to Reserve Bank of India Governor Shaktikanta Das.

“Global growth is widely talked about in India because it influences domestic growth as well. I do not intend to imply that the slowdown that we are experiencing in the country is entirely due to global factors, but they do have an impact.

“For emerging market economies such as India, quick revival of growth is very important – considering their contribution to global growth – and, there is, therefore, a need for coordinated and timely action by all countries. This is a point that needs to be driven home very strongly,” he said.

In 2008, when the global financial crisis happened, multilateralism was at the forefront of global discourse.

Ten years later, when there is a global slowdown, it is no more the dominant theme – bilateralism has overtaken the multilateral sentiment, said the Governor in a speech given on December 18. The speech was uploaded on the RBI website on Wednesday.

“All G-20 countries, led by the United States, had come together after fiancial crisis and worked out a global plan of action to revive growth. We do not see that kind of global action in the current scenario.

“I only hope that global growth does not suffer from hysteresis. That is, delayed action by countries should not overtake or should not stifle the recovery process,” noted the Governor.

Growth drivers

Das observed that going forward India should strive and become a part of the global manufacturing value chain.

“We have been fairly insulated from the global value chain. Therefore, when major manufacturing economies experienced slowdown in the past, India was not significantly impacted.

“It cannot be a justification for remaining permanently away from it for far too long. For a major economy such as ours, which is increasingly making its global presence felt, it is necessary to play a significant part of the global value chain.

“I am sure that the policymakers in the government will give due attention to this aspect,” said the Governor. There are, of course, a number of steps that have been taken in this direction in recent months and years; however, more steps are necessary, he added.

The Governor said food processing could be another growth driver. “We also need to regain our pre-eminence in textiles. Opportunities in the manufacturing and tourism sectors need to be explored further,” he noted.

Das emphasised that spending on infrastructure by the Central and State governments is another important area.

Capital expenditure of States has remained stagnant at around 2.6-2.7 per cent of their gross domestic product (GDP) over the last few years. This needs to be stepped up.

E-commerce and start-ups offer new opportunities, and several steps have been taken to create an enabling ecosystem in these areas.

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