MONETARY POLICY STATEMENT - CONTEXTUALLY SIGNIFICANT
- Credit Rating Agency in India
- RBI Monetary Policy
- MONETARY POLICY STATEMENT - CONTEXTUALLY SIGNIFICANT
The bi-monthly August’s monetary policy was formulated in challenging circumstances. The incipient recovery discernible in June 2020 after the disconcerting crash of April 2020 seemed to have plateaued because of restrictive conditions in many States. Widespread deceleration was manifested in subdued industrial activity, contracting PMI in both manufacturing and services, tepid construction activity, sharp contraction in cargo and air passenger traffic, etc. Agriculture seems to be doing reasonably well with monsoon rainfalls starting strongly in June and July. However, growth in agriculture alone would be grossly inadequate to keep GDP growth positive. In the case of agriculture in India, there is an asymmetry: while it accounts for about 56 per cent of employment, it only contributes 15 per cent to the GDP. Hence 3 per cent growth in agriculture would only contribute 0.45 per cent to GDP growth. Evidently, this is a very small figure in the overall macro context and the recovery is likely to be gradual and calibrated from Q2 of FY21. But the agriculture sector has important forward and backward linkages and is an important determinant of demand revival in rural areas, which can make or mar industries, such as, FMCG, tractors, etc
The bi-monthly August’s monetary policy was formulated in challenging circumstances. The incipient recovery discernible in June 2020 after the disconcerting crash of April 2020 seemed to have plateaued because of restrictive conditions in many States. Widespread deceleration was manifested in subdued industrial activity, contracting PMI in both manufacturing and services, tepid construction activity, sharp contraction in cargo and air passenger traffic, etc. Agriculture seems to be doing reasonably well with monsoon rainfalls starting strongly in June and July. However, growth in agriculture alone would be grossly inadequate to keep GDP growth positive. In the case of agriculture in India, there is an asymmetry: while it accounts for about 56 per cent of employment, it only contributes 15 per cent to the GDP. Hence 3 per cent growth in agriculture would only contribute 0.45 per cent to GDP growth. Evidently, this is a very small figure in the overall macro context and the recovery is likely to be gradual and calibrated from Q2 of FY21. But the agriculture sector has important forward and backward linkages and is an important determinant of demand revival in rural areas, which can make or mar industries, such as, FMCG, tractors, etc