While India's manufacturing growth has remained under pressure in the current fiscal year, RBI Governor Shaktikanta Das said India should strive and become a part of the global manufacturing value chain to boost growth in today's era. He said that India had been fairly insulated from the global value chain in the past which also protected India at the time of global slowdown, but it cannot be a justification for remaining permanently away from it for far too long. "For a major economy such as ours, which is increasingly making its global presence felt, it is necessary to play a significant part in the global value chain. I am sure that the policymakers in the government will give due attention to this aspect," said RBI Governor Shaktikanta Das.
There are a number of steps that have been taken in this direction in recent months and years, however, more steps are necessary, he added. January bulletin of the RBI shows growth prospects in a few other sectors as well. Other than manufacturing, food processing, textiles, and tourism sectors are shown as the key sectors to tap for growth.
Meanwhile, as India has yet not come out of the prolonged slowdown, many companies are not availing their working capital limits to the full, which has kept the investments away from the markets. It points to some slowdown in the economic activity and on the other hand, it could also imply that they have an adequate surplus with them which is being used to meet their working capital requirements, said the RBI report. It also indicated that a certain amount of capital available in the system needs to feed into the investment cycle to keep the momentum up.
Shaktikanta Das also said the markets were somewhat surprised by RBI's action a little ahead of time, in terms of reduction in policy rate as early as in February 2019, when the RBI anticipated that momentum for a slowdown is building up. The RBI further cut the interest rates four times in a row after February 2019. However, the central bank surprised the markets by maintaining the status quo in the policy rates in its MPC meet in December.