Amid the challenges facing the Indian economy, Reserve Bank of India (RBI) governor Shaktikanta Das on Monday stressed the importance of “sentiment" and “mood", which he said were not sufficiently “positive" and “optimistic".
“The mood today ranges from existential angst to a positive attitude," said Das at FIBAC, a banking sector conclave organized by the Indian Banks’ Association and industry body, the Federation of Indian Chambers of Commerce and Industry.
The governor said that when he reads newspapers or watches business news channels, the mood is not sufficiently positive and optimistic.
“One does realize that there are challenges in the economy. One does realize there are sectoral issues. One does realize there are severe external global headwinds and India cannot live in isolation. I am not saying we maintain a Panglossian countenance that we smile away every difficulty. But, in any real economy, the mood is very important," said Das.
The Merriam-Webster dictionary defines Panglossian as an excessively optimistic attitude. Pangloss was the pedantic old tutor in Voltaire’s satirical novel Candide.
There are several opportunities amid the challenges the country faces today, but together, the financial sector, the business community, policymakers and regulators should address these challenges and look ahead with greater confidence, the RBI governor said.
“I think the sentiment is very important. Please look at the opportunities ahead of us. We do realize that there are challenges and difficulties coming from external and domestic sources, but one has to look at the opportunities and capitalize on that," he said.
Meanwhile, March quarter earnings indicate that the Indian economy has slowed down further.
A Mint analysis of corporate results for the quarter ended 31 March showed that slower sales have dragged profits down to their slowest in at least 13 quarters.
Another Mint analysis of 1,284 companies for the June quarter shows aggregate profit, adjusting for one-time gains or losses, declined by 5.23% from a year ago.
Net sales grew by just 4.6% during the quarter.
A range of sectors, including consumer durables, packaged consumer goods, passenger vehicles and real estate, is facing slowing sales and displaying visible signs of a sluggish economy.
The governor also spoke on the importance of financial stability and said that weaker-than-expected growth with signs of a slowdown in major economies, as projected by multilateral institutions such as the International Monetary Fund, is one of the key risks to global financial stability at this juncture.
Looming trade tensions, geopolitical risks, and related uncertainties continue to exert pressure on the investment outlook, he said. Central banks and other regulators are required to follow the cardinal principle that “the regulator never sleeps", said Das.
“What it means is that the regulators and other authorities need to be constantly vigilant and proactively take whatever steps are necessary," he said.
In its August monetary policy, the central bank lowered its gross domestic product (GDP) forecast for FY20 to 6.9%.
A decline in consumption demand and government spending, coupled with the lack of quality jobs, has resulted in India’s growth slowing down.
GDP growth in the fourth quarter of FY19 slowed to 5.8% from 6.6% in the previous quarter, the slowest quarterly GDP growth rate in five years.