On 27 July 2020, the R.B.I. Governor Shri Shaktikanta Das addressed the members of National Council of the Confederation of Indian Industry (CII) where he talked about the five major dynamic shifts in the Indian economy which have the potential to repair, rebuild and renew the tryst with developmental aspirations which are –
- Fortunes shifting in the favor of the agriculture sector.
- Changing Pattern of Energy Production in favor of Renewables.
- Leveraging information and communication technology (ICT) and Start-ups to power growth.
- Shifts in supply/value chains- Domestic & Global.
- Infrastructure as the Force Multiplier for Growth.
He talked about how an effective supply chain can enhance economic welfare and also how investments in sectors with strong forward and backed linkages in the supply chain can generate higher production, income and employment.
According to him “it is the appropriate time to strengthen the position of the country in the global value chain (GVC) that can help in maximizing the benefits of openness. The GVC covers a full range of activities which starts from the conception stage of a product to it’s designing, production, marketing, distribution and post-sale support services which are performed by multiple firms and workers located in different countries”. He also added that the higher the GVC participation of a country the greater will be the gains from the trade as GVC provides a comparative advantage to the participating countries as compared with the non- participating ones. It is estimated that about two-thirds of the world trade happens through GVC.
According to the World Bank’s research findings, a one per cent increase in the GVC participation of a country can result in an increase of per capita income levels by more than one per cent for a country.
“The global shifts in GVC because of Covid-19 will create many opportunities for India. The government of India should focus on these opportunities and also on early completion bilateral free trade agreements with United States, United Kingdom and European Union as strategic trade integration is also important besides diversifying imports”, said the RBI Governor.
THE NEED FOR NEW INFRA FINANCING-
The governor also talked about the fact that apart from previous years dynamic changes the infrastructure gap is still large and according to the estimates of NITI AAYOG the country will be needing approx. US $4.5 trillion as an investment in the infrastructure sector by 2030. He also added that “We are just recovering from the consequences of excessive exposure of banks to infrastructure projects. Non-performing assets (NPAs) relating to infrastructure lending by banks has remained at elevated levels. There is a need for diversifying financing options.”
He also suggested that the setting up of National Investment and Infrastructure Fund in 2015 along with the promotion of corporate bond market, securitization of stressed assets and appropriate pricing and collection of user funds could prove to be the solutions for the finance infra projects.
Mr Das stressed upon the need for finding alternative sources of financing of infrastructure projects and also said that a big push to certain targeted mega infrastructure projects can reignite the economy which can begin in the form of a north-south and east-west expressway together with high-speed rail corridors, both of which would generate large forward and backward linkages for several other sectors of the economy and regions around the rail/road networks.
At last, he ended his speech with the statement that said, “Indian industry will have the pivotal role in what could be a silent revolution.”
With Warm Regards,