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Complete unlock, deeper reforms needed to boost investment: RBI

India, which along with the rest of the world, is currently battling the scarring economic impact of the Covid-19 pandemic, must carry on the reforms process more aggressively to boost investment. Despite a host of measures which include both monetary and fiscal, demand has not picked up and companies are shying away from investing.

Experts called for lifting of the residual lockdown restrictions at the earliest to allow economic activities to resume. India’s first quarter economic growth data will be released on August 31.

The Reserve Bank of India (RBI), in its annual policy, called for deeper reforms to boost investments and economic activities.

The annual report noted that “the upticks that became visible in May and June after the lockdown was eased in several parts of the country appear to have lost strength in July and August, mainly due to re-imposition or stricter imposition of lockdowns.”

This is particularly worrisome as the central bank warned that the contraction in economic activity could continue through the second quarter from July to September. Gurugram, which comes in the national capital region (NCR) of Delhi has directed shops and offices to remain closed during weekends from August 22. Noida, also in NCR, has been following this for weeks now.

Besides, several other states including West Bengal have also come up with their own restrictive lockdown measures.

The RBI also underlined the need to set up several ‘apex authorities’ much like the Goods and Services Tax (GST) Council dealing with land, labor and power to drive structural reforms and speedier implementation of projects.

A drop in capacity utilization along with the weakening of consumption demand and the overhang of stressed balance sheets has emerged as the biggest hurdle in the way of new investments.

Deepak Sood, secretary general, Assocham, told IN that the government must intervene to boost consumption especially now that the festive season kicks in. “There is an urgent need to cut GST by 50 per cent across the board. Besides this personal income tax too needs to be rationalized to boost demand.”

While several policymakers have hinted at having limited fiscal space at this point, Sood said that the immediate focus should be at revising investments and consumption.

“At this juncture, we need to have a very clear focus and we need to steer through this period. For that we need to cut taxes. Why do we have to think of possible revenue losses through tax cuts, in any case people are shying away from making those purchases, so you lose money either way,” Sood said.

Meanwhile, the RBI also suggested that states be encouraged to publicize the availability of litigation-free land with access to modern infrastructure in their jurisdictions..