RBI Governor highlights five key areas that will determine India's growth in the post-COVID world

RBI Governor Shaktikanta Das addressing members of the industry body FICCIRBI
  • Reserve Bank of India (RBI) Governor Shaktikanta Das outlined five areas he believes will determine the Indian economy’s growth in the post-COVID world.
  • This includes human capital, productivity, exports, tourism, and food processing associated productivity areas.
  • According to him, the economy is showing signs of stability, but recovery will be “gradual.”
Reserve Bank of India (RBI) Governor Shaktikanta Das highlighted that India’s economy is showing signs of stability; however, recovery hereafter will be “gradual,” during a webinar organised by industry body FICCI.

He cited that current government security borrowing rates are at a 10-year low, bond yields have softened, and the market is bouncing back. Nonetheless, India’s apex banking solution has not ruled out the possibility of taking more measures to help the economy recover as it carefully monitors the markets.

“There are five key areas that I propose to focus on that I think will determine stability and step India’s growth in the medium term,” said Das.

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Here are the five areas that the RBI Governor highlighted:

1.
Human capital with specific emphasis on education and health
“Investing in people adds to the stock of skills, expertise and knowledge available in a country and that is critical to maximise its future potential growth,” said Das.

He added that the goal to increase public investment in the education sector to 6% of the GDP can be met with help of public-private partnerships (PPPs) to develop the necessary infrastructure, without jeopardising financial viability of private investment while ensuring quality education at affordable costs.

2. Productivity
Das cited a World Bank study which showed how past pandemics like Severe Acute Respiratory Syndrome SARS, Ebola and Zika hit productivity by nearly 4% over three years. “The COVID impact on productivity could be expected to be much higher,” he said.
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Das called on the industry to step up R&D investment with the government focusing on creating an enabling environment.

3. Exports to boost India’s role in the global value chain
The RBI Governor pointed out that India’s participation in global value chains (GVCs) has been lower than many emerging and developing countries. “Among the sunrise sectors that offer potential for higher exports in the post-COVID period are drugs and pharmaceuticals where India enjoys certain competitive advantages,” he said.

According to Das, the government’s “sharp policy focus” on GVC intensive “network products” — IT hardware, electrical appliances, automobiles and others — will also boost India’s export strategy with scope for higher value addition.
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4. Tourism
Tourism has been one of the most heavily impacted sectors during the coronavirus pandemic. However, Das believes that it’s also the sector where pent up demand could drive a V-shaped recovery once the world normalises.

“The multi-pronged supportive policy interventions in the sector may have to be reviewed and revamped, if tourism has to contribute more to the economy matching its potential,” he said.

5. Food processing associated productivity areas
Das believes that like drugs and pharmaceuticals, food processing is another sunrise industry in India. “ Its importance in the consumer basket has increased over time, led by rising per capita incomes, urbanisation, and change in consumer perceptions regarding quality and safety,” he said.
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But, there is a need for the sector to move up the value chain, according to the RBI Governor. . “India can move up in the global agricultural value chain by increasing its share of processed food exports, for which quality standards will be a critical factor,” explained Das.

These five areas along with the five factors he had highlighted in July will help India rebuild its economy, according to him.

“They [the five factors] may escape our attention in this all-consuming engrossment with the pandemic, but they could be nursing the potential to repair, to rebuild and renew our tryst with developmental aspirations,” Das said at a webinar, organised by the Confederation of Indian Industry (CII).
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These are the five ‘dynamic’ shifts the RBI Governor had highlighted earlier:

  1. Fortunes shifting in favour of the farm sector
  2. Changing energy mix in favour of renewable energy
  3. Leveraging information, information communication technology (ICT) and start-ups
  4. Strengthening supply and value chains
  5. Focusing on infrastructure as a growth multiplier
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