RBI Report On Economy – Burning Issues

Table of Contents

WHAT IS THIS REPORT?

Number of fraud cases reported in 2018-19 by banks increased by 15% compared to last year.
But the amount involved in frauds has gone up by a whopping 73.8%.
However, the RBI adds that the amounts and frauds are related to earlier years.
Banks took an average of 22 months between the occurrence of the fraud and its detection.

The central bank has forecast India’s GDP to grow at 6.9% for FY20.
In the range of 5.8-6.6% during the first half of the year and 7.3-7.5% in the second half.
The recent deceleration in GDP could be due to cyclical downswing, rather than a deep structural slowdown.

Nonetheless, there are still structural issues in land, labour, agricultural marketing and the like that need to be addressed.

The nature of the slowdown, RBI said, will determine the policy response.
A soft patch can be looked through.
While a cyclical downswing will warrant counter-cyclical actions in terms of monetary and fiscal policies.
But a structural slowdown will need deep-seated reforms.

The delayed onset and skewed distribution of the south-west monsoon may pose downside risks to crop production and rural consumption demand.
This is evident in the sharp contraction in the sales of motorcycles and tractors.

Though consumption is the bedrock of domestic demand in India, it is an investment that provides the turning points in the growth trajectory.
The investment rate – measured by the ratio of gross capital formation to GDP – had fallen to 32.3% in 2017-18.
Downslide in sales growth of manufacturing companies is impacting sentiments.
There has to be-
Continuing improvement in ease of doing business.
Reforms in factors of production, viz., land and labour
Capitalising on opportunities opened up by the heightened trade tensions.