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RBI sees demand recovery taking time

While India announced  ₹21 tn worth of measures to support the economy through the virus crisis, most of the measures were focused on credit support rather than budgetary assistance to boost immediate demand (Photo: Mint )Premium
While India announced 21 tn worth of measures to support the economy through the virus crisis, most of the measures were focused on credit support rather than budgetary assistance to boost immediate demand (Photo: Mint )

The RBI said aggregate demand in the economy is likely to take time to mend in the absence of greater fiscal support, even as the government is constrained in its ability to do more

India’s central bank said aggregate demand in the economy is likely to take time to mend in the absence of greater fiscal support, even as the government is constrained in its ability to do more.

“An assessment of aggregate demand during the year so far suggests that the shock to consumption is severe," the Reserve Bank of India said in its annual report for the year ended June 30. “It will take quite some time to mend and regain the pre-Covid-19 momentum."

Private consumption has lost its discretionary elements across the board, the central bank said, while noting that transport services, hospitality, recreation and cultural activities were particularly most affected in Asia’s third-largest economy -- where consumption accounts for some 60% of gross domestic product.

While India announced 21 trillion ($282 billion) worth of measures to support the economy through the virus crisis, most of the measures were focused on credit support rather than budgetary assistance to boost immediate demand.

Both the federal government as well as the states have much “less fiscal space to deal with Covid-19 than during the" global financial crisis, according to the RBI.


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