Reserve Bank Of India Says Economy Is Gaining Traction

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RBI has noted that economy is gradually gaining traction after the second wave of pandemic

The Reserve Bank of India (RBI) has noted that while the sluggish retreat of the second wave of Coronavirus pandemic has impacted Indian economy, the supply situation is improving as monsoon is getting back to normal levels and sowing activities have quickened.

Commenting on the overall state of the economy, the RBI in its monthly bulletin for August 2021 has observed that “aggregate demand conditions are buoyed by the release of pent-up demand post unlock… Reaffirming the traction that the economy is gaining, the manufacturing activity is gradually turning around, while contraction in services has moderated. Spurred by comfortable liquidity conditions, financial conditions stay benign and supportive of the recovery”.

The second chapter in the bulletin focusses on the impact of the infection on food prices, and taking into account data on retail and wholesale prices of 22 food items, it noted that “mark-ups increased on average during the first nation-wide lockdown (March-May 2020) and persisted even during the subsequent unlocking phase. Furthermore, the increase in margins was found to be driven predominantly by market centres, which faced high intensity lockdowns as measured by the mobility indices”.

In the third chapter of the bulletin, the central bank has focussed on Targeted Long-Term Repo Operations (TLTRO) and its impact on non-banking financial companies’ (NBFCs) structural liquidity.

“In the wake of the Covid-19 pandemic, liquidity position of NBFCs worsened and their funding challenges intensified as markets and banks pulled back. The Reserve Bank and the Government of India introduced many liquidity enhancing schemes to help them get through the rough patch,” introductory note on the chapter read.

On studying the impact of the TLTRO scheme on NBFC’s structural liquidity, it was found that those NBFCs, which received funds through the scheme, witnessed an improvement in their short-term liquidity buckets compared to others.

The last chapter reviews the performance of small finance banks, and finds after examining their operational financials that these institutions have a high credit deposit ratio and most of them have healthy profitability with further improvements in recent quarters.

Author: desi123 is an online news portal that aims to provide the latest trendy news for Asians living in Asia and around the World.

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