Outlook For The Indian Economy Is Bright By Any Projection: RBI Report


The April `State of the Economy’ report of the Indian central bank says “Half a year has gone by since we re-launched this … after a hiatus of 25 years to keep its readership abreast of current macroeconomic and financial developments. We have sought to dispel the heightened uncertainty brought on in pandemic times by information asymmetry. The article has received a fair amount of interest, which has also included some constructive criticism. This has gratified us – as the heat and dust settles, there will be light. The very thought incentivises us to keep raising the bar with regard to information flow while upholding the readership’s prerogative to hold diverging views so that an informed debate ensues.”

This will encourage anyone to offer feedback. And, I am no exception.

Right from the word go, it’s a brilliant piece of literature. And a statement of hope.

Look at the very beginning: “In the fourth month of the Year of the Recovery (2021), humanity’s future hangs on a pendulum, oscillating between hope – vaccination – and despair – vaccine nationalism; and vaccine hesitancy.” Wow!

After making a brief point that “India is showing the way… in investing overseas,” the literary flourish returns: “Four markers watched stormy March give way to April’s spirit of youth that will keep hopes alive despite rising infections…”

Referring to the Central Government’s decision to keep the inflation target unchanged at 4 per cent retail inflation with an upper tolerance level of 6 per cent and a lower tolerance level of 2 per cent, it says, “The monetary policy framework is a shining example of monetary-fiscal coordination in which the Government sets the target and the Reserve Bank achieves it.”

It also says, “Globally, monetary policy has entered a twilight zone and until clarity emerges on the shape of the future, it is important to entrench India’s nominal anchor at 4 per cent CPI headline inflation so that it can continue to perform its stabilising role.”

If you think inflation is the only concern of the Reserve Bank of India, you’re mistaken. Environment too is on its radar. So, the report goes on saying…

“With heightened levels of the risk of the earth warming beyond a critical threshold, three elements will define the way we live, going forward: fresh water resources; green energy; and clean air. Water is precious; it touches every aspect of sustainable development. Managing water means access to drinking water, sanitation, hygiene, wastewater, environment and health – sustainable developmental goal number 6.

Commemorating World Water Day on March 22, India launched ‘Catch the Rain Where it Falls, When it Falls’ emphasising the importance of water harvesting. Mahatma Gandhi National Rural Employment Guarantee Act offers a way — rainwater harvesting pits; de-silting check dams and lakes; repairing tank bunds; rejuvenating storm water drains using Google Earth; constructing soak pits and krishi hondas in farms; constructing tanks for livestock; creating new tanks; and recharging borewells – with upward revisions in daily pay for these activities.…Fresh drinking water is within our reach, but we must make every drop count…”

It also says, “In central banks, a green revolution is underway. They grapple with the reality of climate change, which is affecting economic activity in ways that monetary authorities cannot ignore any longer, including in the context of their central remits – price and financial stability. The environment is slowly making its way into central bank mandates.”

Indeed India is battling a ferocious rise of new infections and mortalities, perhaps the fastest for any country of continental dimensions but this too shall pass.

“We have seen off the first wave, and we have largely adapted. Pandemic protocols, speedier vaccination, ramping up hospital and ancillary capacity, and remaining resolutely focused on a post pandemic future of strong and sustainable growth with macroeconomic and financial stability is the way forward,” the report says, adding, “As Benjamin Franklin used to say, energy and persistence conquer all things. When we strive to become better than we are, everything around us becomes better too. In the words of Fyodr Dostoyevsky, the secret of man’s being is not only to live but to have something to live for. India has a lot to live for; among them is the strong likelihood of being the world’s fastest growing economy in 2021 and 2022.”

What probably takes the cake is the reference to good monsoon prediction.

“The April 16 forecast of the India Meteorological Department is the icing on the cake – once again, the monsoon’s passion is set to captivate India. As the sage Valmiki wrote in the Ramayana, the sky ‘will drink the waters of the ocean and give birth to a liquid offspring, the elixir of life. The scorched earth will wear a robe of brilliant green’.

No, it did not mention the lovely romantic song sung by  by Alka Yagnik and Udit Narayan “Tip Tip Barsa Paani”. Remember the scene in Mohra, a 1994 Indian movie stirring Akshay Kumar and Raveena Tandon? One of the best Bollywood rain songs.

Those who think that RBI is too optimistic, the report says, “Yes, confronted with a once-in-a-lifetime pandemic with no known cure so far, with infections and deaths that have drawn comparison to the Spanish flu of 1918, we have dared to keep the faith and dream about a COVID-vanquished world. “

It goes on” “There are several positives in this experience – the virus has shown us how globalised we are; the unprecedented and synchronised policy response we can mount when confronted with seemingly insurmountable odds; the swiftness with which the genome sequence of the virus was mapped and shared worldwide; the speed with which vaccines were developed. We are dealing with a pestilence that spreads not linearly but in waves, and peaks inevitably give way to troughs with learning experiences during and between that wound but also strengthen. And so, we ‘hope in the face of difficulty. Hope in the face of uncertainty. The audacity of hope!’”

It concludes, saying: “The outlook for the Indian economy is bright by any projection. If the relatively conservative growth forecast of the Reserve Bank holds, India’s GDP in 2021-22 will exceed its level in the pre-pandemic year of 2019-20.”

“There will be scars, some taking longer than others to heal, but there will also be a celebration of life, with humankind building stately mansions of achievement, each new temple nobler than the last. And it is important to retain that light amidst the encircling gloom. It is said that the mind has a thousand eyes, but eyes are useless when the mind is blind.”

Pure poetry…

Thank you.

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