Page 178 - CW E-Magazine (26-3-2024)

Special Report Special Report

cial inclusion. In all these areas, we have The Reserve Bank is leveraging have to be cognizant of emerging deve- are now promising and can be utilised to vegetable price shocks, monetary policy culture sector in India faces challenges
continuously strengthened our capabili- data analytics and carrying out periodic lopments and associated risks. propel our economy to a higher growth can await the dissipation of the fi rst- of productivity gaps, shifting preferen-
ties over the decades in tune with the off-site analysis to provide sharper ana- trajectory. round effects of such shocks that may ces and sudden weather events. All these
transition of the Indian economy from lytical inputs to its onsite supervisory Indian economy – the current setting produce short-lived spikes in headline require heavy investments in infrastruc-
a state-dominated system in the 1950s, teams. An Early Warning Framework As a backdrop to the building blocks The challenge of high infl ation, infl ation. We will remain on guard to ture and innovation to modernise the
1960s and 1970s to a growing market has been developed. A new SupTech for future growth, let me turn briefl y to however, still persists and has to be ensure that second order effects in the sector and realise its true potential in
economy from the 1990s onwards. initiative, with the name “DAKSH”, the current macroeconomic scenario, effectively addressed. After reaching a form of generalisation and persistence terms of achieving higher productivity,
has been launched. A College of Super- starting with the global environment. low of 4.3 per cent in May 2023, head- are not allowed to take hold. The providing more effi cient access to mar-
The process of liberalisation and visors (CoS) has been set up to upgrade The global landscape is witnessing line infl ation had risen to 7.4 per cent in frequent incidences of recurring food price kets, and maximising farmers’ income.
globalisation of the Indian economy supervisory skills of the regulatory and major structural changes. The process July driven by the surge in tomato and shocks pose a risk to anchoring of infl a- As a nation we must fi nd a way of car-
initiated since 1991 added several new supervisory staff. Recently, we launched of globalisation has slowed down and other vegetable prices. The July number, tion expectations, which has been rying out the much needed agricultural
dimensions to the responsibilities of the a Centralised Information Management is drifting from multilateralism towards which was released after the MPC meet- underway since September 2022. We will reforms, especially in the area of agri-
Reserve Bank. Along with fi nancial sec- System or CIMS, which is our next gene- bilateralism and geo-economic frag- ing, was on the higher side compared remain watchful of this also. The role of cultural marketing and the connected
tor reforms, the monetary policy frame- ration data warehouse. Digital Payment mentation. Friend-shoring and reshoring to our estimates. Prices of vegetables continued and timely supply side inter- value chains. These reforms are critical
work has been fi ne-tuned over the years, Security Control Guidelines have been have become more pronounced. Global surged by 37.3 per cent (year-on-year), ventions assumes criticality in limiting not only for sustained high growth, but
leading to the fl exible infl ation targeting issued to address the risks in digital pay- supply chains have been under pressure, led by an increase of 20 1.5 per cent in the severity and duration of such shocks. also for farmers’ income, durable price
framework in 2016. Over the last three ment products. Guidelines for digital which along with rising global commo- tomato prices. Refl ecting these drivers, In these circumstances, it is necessary to stability and to mitigate the frequency
years, we have utilised the fl exibility in lending – an emerging area – have also dity prices contributed to multi-decadal food group infl ation more than doubled be watchful of any risk to price stabi- and intensity of food price shocks that
the monetary policy framework to cali- been issued. In fact, it will not be off the high infl ation in 2022. The resultant from 4.7 per cent in June to 10.6 per cent lity and act appropriately and in time. we have seen in the recent months. Poli-
brate our actions to counter the adverse mark to say that almost the entire regu- aggressive monetary tightening has in July. On the positive side, infl ation We remain fi rmly focused on aligning cies towards setting up and improving
effects of COVID-19 and the war in latory and supervisory architecture of dampened the global growth outlook. excluding food and fuel (core infl ation) infl ation to the target of 4.0 per cent. cold chains and storage facilities, mega
Ukraine. During the COVID-19 pan- the fi nancial sector has been restructured Tight fi nancial conditions and volatile has softened by around 130 basis points food parks and food processing units
demic, our Monetary Policy Committee in the last 4 to 5 years. capital fl ows are accentuating the impact from its recent peak in January 2023. Building blocks for a sustainable are steps in the right direction to reduce
(MPC) reacted swiftly by reducing the of global slowdown on the prospects of Although it is still elevated at 4.9 per future wastage and improve value addition in
policy repo rate by 115 bps cumula- While pursuing these reforms, the emerging and developing economies. cent, this steady easing of core infl ation Having provided a snapshot of the the agriculture sector.
tively in a span of two months (March- Reserve Bank has also made conscious Headline infl ation is now easing unevenly over the last fi ve months is indicative of current context, I would now like to
May 2020). Along with the rate cut, we efforts to improve systemic resilience across countries, but remains above the the ongoing transmission of monetary tum to the certain thrust areas that can Manufacturing
infused signifi cant quantum of liquidity and effi ciency by maintaining external target in major economies. The pace of policy. propel India forward over the next 25 The manufacturing sector plays an
through both conventional and uncon- stability and building forex reserves. The monetary tightening has been scaled years. The potential is huge for India to important role in economic growth due
ventional measures to stimulate the development of vibrant fi nancial mar- down, but policy rates could stay higher Looking ahead, the spike in vegeta- raise its growth trajectory and improve to its specifi c characteristics like econo-
economy, restore confi dence and revive kets has also been a key priority. These for longer in several countries. Even ble prices in July is starting to see a cor- the general well-being of the people. mies of scale, backward and forward
market activity, while ensuring that our reforms, among other things, seek to as the grim prospects of hard landing rection, led by tomato prices. New arri- In this context, I would like to focus linkages, and integration to global sup-
liquidity augmenting measures did not remove market segmentation, facilitate have receded, global growth is likely to vals of tomatoes in mandis are already on six key areas that can provide the ply chains. Manufacturing is also one of
engender future fragilities(5). greater access including non-residents, remain low by historical standards in the softening prices, coupled with proac- required growth momentum. They are the largest consumers of services, mak-
widen the participation base, promote medium-term. With increasing climate tive supply management in the case of (i) agriculture; (ii) manufacturing; (iii) ing the two sectors complementary to
Recognising the need for strengthen- innovation, and ensure customer protec- change risks, the development of onions. We expect to see an appreciable services; (iv) demography; (v) techno- growth. Contrary to the conventional
ing fi nancial stability, the Reserve Bank tion. Measures have also been taken to climate-friendly technology, new and slowdown in vegetable infl ation from logy; and (vi) start-ups. In all these areas, growth paradigm in which an economy
has taken a number of initiatives to re- put in place state-of-the- art market infra- renewable sources of energy, and sus- September. Meanwhile, the prospects we already have certain comparative transitions from agriculture to manu-
vamp regulation and supervision of Banks, structure, pilot launch of central bank tainable agricultural practices would for kharif crops have improved, thanks advantages, which should continue to facturing and then to services, India has
NBFCs and other fi nancial entities by digital currency (CBDC) and inter- shape our future. The pace of progress to the progress of the monsoon in July, be exploited to push our growth frontier directly leapfrogged from an agrarian
developing an integrated and harmonized nationalisation of the rupee. The COVID in these fronts need to be hastened. although the cumulative rainfall has further. Let me now touch upon these to a service-led economy. As a result,
architecture. The supervisory approach crisis was converted into an opportu- again moved into the defi cit territory(6). areas one by one. the share of the manufacturing sector in
is now geared to effectively address the nity by harnessing the best benefi ts of Amidst such volatile world environ- gross value added (GVA) has remained
root cause of vulnerabilities and identi- digitalisation. ment, India stands out as the emerging The outlook for cereal prices has Agriculture stagnant at around 18-19 per cent.
fying any build-up of potential systemic growth engine for the world. India’s real accordingly brightened, supported by Despite having only 2.4 per cent of
risks. We engage regularly with all regu- Thanks to these and several other gross domestic product (GDP) recorded active supply side interventions. Sudden the world’s land area, India is among the In the changing landscape of the
lated entities to identify incipient signs of initiatives by the RBI and the banks and a growth of 7.2 percent in 2022-23, weather events, EI Nino conditions and top fi ve agri-producers globally(7). Indian manufacturing sector(8) India has the
stress and deal with them at an early stage. other fi nancial entities, India’s fi nancial surpassing its pre-pandemic level by renewed geopolitical tensions, however, agriculture epitomises enormous diver- potential to capitalise on emerging areas
We have been focusing on constantly sector remains resilient and healthy. 10.1 percent. Overall, the conditions are impart uncertainty to the food prices sity with wide ranging agro-ecological such as aerospace and defence, low-
improving governance and the functions There is, however, no room for compla- favourable for the growth momentum outlook. As I noted in my monetary areas. India is not only self-suffi cient in carbon technologies, electric vehicles
of compliance, risk management and audit cency. New challenges and stress points to continue and the capex cycle to gain policy statement on August 10, 2023, food production, but is also net exporter and semiconductors. India has initiated
in banks and other fi nancial entities. keep coming up and all stakeholders momentum in 2023- 24. Opportunities given the likely short term nature of the of food grains. Nevertheless, the agri- reforms to build manufacturing prowess

178 Chemical Weekly March 26, 2024 Chemical Weekly March 26, 2024 179

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