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Diagnosis of type of economic slowdown difficult: RBI Annual Report

RBI Annual Report 2019 released: The apex bank did not offer any concrete reason behind the slump and added that a diagnosis of the type of economic slowdown is difficult.

twitter-logoBusinessToday.In | August 29, 2019 | Updated 19:51 IST
Diagnosis of type of economic slowdown difficult: RBI Annual Report
RBI Annual Report 2019 released

The Reserve Bank of India (RBI) released its annual report on Thursday evening. Taking the bull by the horns, the apex bank addressed the economic slowdown in the country. However, the bank did not offer any concrete reason behind the slump and added that a diagnosis of the type of economic slowdown is difficult.

The bank put forth a question in its report and asked if we were dealing with a "soft patch" or is it a "cyclical downswing" or a "structural slowdown". "The key question that confronts the Indian economy as it looks ahead to the rest of 2019-20 is: are we dealing with a soft patch, or a cyclical downswing, or a structural slowdown? This will determine the policy responses - illustratively, a soft patch can be looked through, while a cyclical downswing will warrant counter-cyclical actions in terms of monetary and fiscal policies, but a structural slowdown will need deep-seated reforms," it added.  

The report mentioned that these conditions are not really easy to disentangle and a precise diagnosis is difficult. "The diagnosis is difficult; these conditions are hard to disentangle cleanly, at least in the formative state. Proximate answers could perhaps be found in the lessons of the experience of 2018-19, with which it could be feasible to assess the outlook for 2019-20 and the challenges that lie ahead," it said.

The RBI, which has cut its key rates by 1.10 per cent in 2019 to a nine-year low of 5.4 per cent in four successive rate cuts to help revive the sagging growth, says reviving consumption and private investment have assumed the "highest priority" now for all.

This can be done by strengthening both the banking and non-banking sectors, a "big push" to infrastructure spends and implementation of the much-needed structural reforms in labour laws, taxation, and other legal reforms, it says.

Also read: RBI Board approves transfer of Rs 1.76 lakh crore to Centre

Also read: RBI balance sheet grows 11% to Rs 40.49 lakh crore in 2018-19

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