New Delhi: RBI Governor Shaktikanta Das on Monday made a strong case for stepping up investments in the infrastructure sector to restart the economy reeling under the impact of the COVID-19 pandemic.
Stating that recent agriculture reforms have opened up new opportunities, Das also said the sector is emerging as a bright spot and "fortune is shifting in favour of the farm sector in the economy".
In his address to India Inc at a CII event, Das said "Experience shows that in periods when terms of trade remained favourable to agriculture, the annual average growth in agricultural gross value added (GVA) exceeds 3 per cent."
"Hitherto, the main instrument has been minimum support prices, but the experience has been that price incentives have been costly, inefficient and even distortive."
"India has now reached a stage in which surplus management has become a major challenge. We need to move now to policy strategies that ensure a sustained increase in farmers’ income alongside reasonable food prices for consumers."
"An efficient domestic supply chain becomes critical here. Accordingly, the focus must now turn to capitalising on the major reforms that are underway to facilitate domestic free trade in agriculture," he added.
He noted that 1 per cent increase in global value chain participation can boost per capita income level of a country by more than 1 per cent.
The central bank governor further said that it may be necessary to focus on greater strategic trade integration, including in the form of early completion of free trade agreements with the US, EU and the UK.
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Speaking on investment in infrastructure Das said that both private and public sectors have to play an important role in developing infrastructure that requires huge investments.
The infrastructure space, he said, could act as a force multiplier for the economy, adding that a big push to certain targeted mega projects can "reignite" the economic growth.
With regard to forex rate, Das said the RBI has no fixed target for the rupee but will monitor undue volatility.
The RBI Governor assured the industry that the central bank will not hesitate to take steps as and when required amid challenges and will remain extremely vigilant.
He said that various liquidity measures taken by the central bank have revived the corporate bond market.
Corporate bond issuance has touched Rs 1 lakh crore in the first quarter, much higher than the same period a year ago, Das said.
The RBI Governor said he has advised banks to undertake a stress test and raise capital proactively to meet challenges.
(With PTI inputs)
