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Lowering GDP raises, advised bank to geared for newer challenges

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Shaktikanta Das, RBI, Governor

RBI Governor Shaktikanta Das was in the bhubaneswar to attend a central board meeting. He also met Chief Minister Naveen Patnaik in the capital.

“There is nothing like putting banks on alert though a section of media has reported. We have said that banks should remain prepared to face the emerging and new challenges,” Das told reporters.

Recently the Governor said, growth is the responsibility of both the government and the RBI and both will continue to work in a coordinated manner. So far, there is good coordination between the fiscal and the monetary authorities. To say that one is looking at the other for growth is wrong. Both are committed towards the revival of growth. The government and the RBI are continuously working together to achieve the national objective of reviving growth. It is not one individual authority’s problem,” he added.

 

However, few publications quoted, in view of the current economic situation of the country, RBI Governor Shaktikanta Das has asked banks to be ready. In the talks with the heads of public sector banks, RBI Governor Shashikant Das has said that the current economic conditions can pose some challenges, so banks should be ready to face the situation.

 

In a statement issued by the Reserve Bank, it said that, “The Governor asked the banks to be fully alert to meet the emerging challenges.” In this case, he has specifically asked to work in a coordinated manner in the solution of stressed assets. “The RBI governor said this at a time when the country’s gross domestic product (GDP) growth is at a six-year low Is on.

 

As per the data, government figures, GDP growth has reached 4.5 percent in the second quarter of the current financial year. In view of this, the Reserve Bank has also reduced the estimate of economic growth for the current financial year to 5 percent. However, Subramanian swamy, the former Harvard economics professor and  who has been long ignored for the FM post, had said that a ‘major crash was inevitable’.

 

Two days before the GDP figures had been revealed, he had slammed Nirmala Sitharaman saying she ‘doesn’t know any economics’ and that the real growth was around 1.5%. He had told Huffington Post two days before the GDP figures were revealed: “Do you know what the real growth rate today is? They are saying that it is coming down to 4.8%. I’m saying it is 1.5%.”

Key highlights:

  • Air India has sought a guarantee of Rs 2,400 crore from the government to raise capital to meet operational requirements.
  • FM Nirmala Sitharaman has indicated a cut in Income Tax in the budget of 2020-2021. To give money in the hands of the middle class and to increase the consumption
  • After SBI and HDFC, now BoB and BoI also reduce interest rate

According to DK Joshi, Chief Economist of rating agency CRISIL, the government will have to take many steps to increase demand in the country and bring the economy out of a slowdown. He said that a reduction in Income Tax could be one of them.

 

The fact is the spending power of people needs to be increased. The government will have to pay money in the hands of the lowest income people. This amount can be given through schemes like MNREGA.

Corporate tax cuts were the biggest decision taken in this direction. At the same time, the RBI has also reduced the repo rate by 1.35 % to burden the EMI of the people.

 

 

Two sets of government data released , that says some more bad news with industrial growth contracting for the third consecutive month. Factory output contracted 3.8 per cent in October. This poses a real dilemma for the Monetary Policy Committee, led by the RBI Governor.

Negative industrial growth rate warrants lower interest rate, however, higher rate of retail inflation will force the Committee not to go for any rate cut in the next round of policy review meeting scheduled in February.

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