As the Reserve Bank of India (RBI) called for wide-ranging reforms, it regarded declining capacity utilisation, weakening of consumption demand and overhang of stressed balance sheets as the reasons behind restrain of new investments. This took place on Tuesday in an attempt to regain losses due to Covid-19 crisis and return to the path of sustainable economic growth.
It further added that Covid-19 crisis can be converted into an opportunity by using an online provision of education and training to implement reforms in the social infrastructure by skill development and reskilling so as to prepare a labour force equipped to keep pace with a big thrust on infrastructure.
“These underlying developments suggest that the appetite for investment is anaemic and in need of more reforms,” said the central bank in its 2019-20 annual report.
The corporate tax cut of September 2019 has been utilised in debt servicing, a build-up of cash balances and other current assets rather than restarting the capital expenditure cycle, it said.
However, the impact that 68 days of lockdown have had on factor income loss (capital and labour) in the manufacturing and mining sectors could be as high as Rs 2.7 lakh crore.
In some areas of work like hospitality, hotels and restaurants, airlines and tourism, employment losses are more severe than in other.
India’s reduced overall growth ehich is projected at minus 4.5 per cent for 2020-21, is explained as owing to these factors. Significantly, India has now reached a stage in which surplus management has become a major challenge.
To this, RBI said “The priority is to move to policy strategies that ensure a sustained increase in farmers’ income alongside reasonable food prices for consumers.”
The IT sector is best placed to drive this process and also manage its consequences. Promoting young firms and startups and ensuring their survival will be critical for greater employment generation and higher productivity-led economic growth in India, said RBI.
They further added, “It will be essential to reorient resources and policy focus in this direction. Dynamic entrepreneurship, innovation and the ability to nurture ideas to actualisation embodied in start-ups are the hallmarks of success in ICT.”