RBI Governor Shaktikanta Das today said that after seeing a sharp GDP contraction in the first quarter, the Indian economy has exhibited a stronger than expected momentum in activity. However, he added that even as the growth outlook has improved, downside risks remain with respect to the surge in Covid infections. “We need to be watchful about the sustainability of demand after festivals and a possible reassessment of market expectations
surrounding the vaccine,” he further said. The calibrated opening up of the economy can supplement domestic savings, and help fund the growth requirements, Shaktikanta Das underlined while speaking at the 4th Annual Day of Foreign Exchange Dealers’ Association of India (FEDAI).
The RBI governor said that market participants responded with alacrity and together we have been able to ensure stable and resilient markets across all segments. Further, a comfortable external balance and current account surplus have brought comfort. He added that internationalisation of financial markets can lower transaction costs with efficiency gains. He underlined that capital account is convertible to a great extent today.
Shaktikanta Das noted that the Reserve Bank has taken steps to usher in the next phase of reforms to accelerate the pace of liberalisation. The recent reform measures, many of which are in the works, have been fashioned around the four major themes of (i) liberalising financial markets and simplifying market regulation; (ii) internationalising financial markets; (iii) safeguarding the “buy side” – user protection; and (iv) ensuring resilience and safety.
Meanwhile, the RBI Governor said that simplifying regulations and providing procedural flexibilities have also contributed to easing operating conditions and thereby reducing costs and inefficiencies. While some operational constraints are inevitable, especially those warranted by prudential considerations, RBI’s approach has been to ease operating conditions within these considerations. Concluding his remarks, Shaktikanta Das said that the achievement of desired outcomes is contingent on financial institutions and market participants taking forward the reform agenda so that India has vibrant financial markets and efficient financial intermediation.