By all indications, the deep contractions of Q1:2020-21 are behind us; silver linings are visible in the flattening of the active caseload curve across the country, RBI Governor said.
BY B N KUMAR
MUMBAI, Oct 9 (BNC Network) Indicating positive vibes, RBI Governor Shaktikanta Das today said barring the incidence of a second wave, India stands poised to shrug off the deathly grip of the virus and renew its tryst with its pre-COVID growth trajectory.
Business and industry captain have hailed these indications and hoped that the nation would be in the path to recovery soon.
Announcing the status quo in the repo-rate of 4%, Das said that the Indian economy is entering into a decisive phase in the fight against the pandemic.
Relative to pre-COVID levels, several high-frequency indicators are pointing to the easing of contractions in various sectors of the economy and the emergence of impulses of growth. “By all indications, the deep contractions of Q1:2020-21 are behind us; silver linings are visible in the flattening of the active caseload curve across the country,” he said.
In this environment, the focus must now shift from containment to revival. Undeterred by the pandemic, the rural economy looks resilient. Kharif sowing has already surpassed last year’s acreage as well as the normal sown area. Improved soil moisture conditions, along with healthy reservoir levels, have brightened the outlook for the rabi season. Early estimates suggest that food grains production is set to cross another record in 2020-21, the Central Bank governor said. Job creation under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) has provided incomes and employment in rural areas. Meanwhile, migrant labour is returning to work in urban areas, and factories and construction activity are coming back to life. This is also reflected in rising levels of energy consumption and population mobility. In cities, traffic intensity is rising rapidly; online commerce is booming; and people are getting back to offices. The mood of the nation has shifted from fear and despair to confidence and hope, he said.
Commenting on the RBI announcement, ASSOCHAM president Dr. Niranjan Hiranandani said “It affirms our beliefs that the worst is over for the Indian economy.”
The RBI governor also confirmed that the contraction in economic growth witnessed in the April-June quarter with 23.9 percent is behind us. He also accepts that growth is likely to pick up in the second half of the fiscal and enter into the positive zone in the January-March quarter,” Dr Hiranandani pointed out.
“Further reduction in key interest rates was not a possibility at this juncture. The RBI’s decision to extend the scheme for co-lending to all NBFCs, HFC in respect of all eligible priority sector loans will allow greater operational flexibility to the lending institutions and is much welcomed,” he said.
RBI’s decision to rationalise the risk weights on home loans and link them to Loan to value ratios only will give a boost to the real estate sector as well, he said. “Particularly this step would benefit borrowers of higher value loans. It would ensure that more credit is available to borrowers. This move is a much appreciated step recognising the role of the real estate sector in generating employment and economic activity,” he added.
Dr. Hiranandani explained that the industry welcomes the Reserve Bank of India’s announcement to undertake further measures as necessary to assure market participants of access to liquidity and easy finance conditions. “The RBI has through its proactive measures taken honest efforts to provide access to easier credit to smaller businesses. However, we believe further steps would be needed to revive the economy,” he said.
Anuj Puri, Chairman – ANAROCK Property Consultants, said with real estate demand gradually seeing some green shoots of revival, especially in the wake of reduced stamp duty charges in States like Maharashtra and developers discounts and freebies, reduced repo rates would have given an added boost just before the upcoming festive season. But with consumer inflation still trending at the upper end of the apex bank’s band, and the policy repo rate also being substantially reduced by 140 basis points in 2020, today’s move was expected.
On a positive note, RBI’s move to rationalize risk weightage on home loans and linking housing loans risks only to loan-to-value is a welcome move. This announcement thus will definitely encourage banks to lend more to individual homebuyers without feeling the stress on their balance sheets. In the current.
Anshuman Magazine, Chairman & CEO - CBRE India, South East Asia, Middle East & Africa, said: “The RBI’s decision of keeping the repo rate unchanged was on expected lines owing to the rise in inflation in recent months. However, they have maintained an accommodative stance which is positive for the economy. RBI's decisions to relax LTV guidelines and rationalize risk weights for home loans will further encourage homebuyers and their review of the co-origination model between banks and NBFCs and extended the scheme to all NBFCs (and banks) will improve the flow of credit in the economy. We are hopeful that these measures will strengthen recovery in residential demand and support construction activity as well.”
Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory, said “The status quo was on expected lines. The steep reduction in the rates over the past several months are slowly beginning to show impact on the ground. The move by RBI to link risks to loan to value will help banks shred the cautious lending approach. The move is bound to offer a much needed jump start to lending and liquidity cycle in the marketplace. The move is quite differentiated and going to be effective.”
Bhushan Nemlekar, Director, Sumit Woods Limited, said "The RBI Policy decision is in the right direction. I feel now with the upcoming festive season, banks will offer better rates to the customers for housing loans. We hope that the bank takes cue from RBI's accommodative stance and passes on the benefit to the home loan buyers."