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Context: Predicting a V-shaped economic recovery, the central bank of India has said that if growth momentum continues and inflation stays mild, then there will be a room for policy action to support growth. This observation came in the State of the Economy report released by the Reserve Bank of India (RBI). This comes at a time when the top bank started draining out the surplus liquidity in the money markets, to stave off an economic crisis as a result of COVID-19 pandemic. The consumer confidence is expected to increase from January 2021, peak in July 2021 and continue till September, said the report. Meanwhile, investors took some profit off the table on Friday after markets scaled historic levels a day before, when the BSE Sensex surpassed the 50,000-mark for the first time. Sensex ended near the day's low at 48,878.54, down 746 points dragged by Reliance, ICICI and the HDFC twins. Bajaj Auto remained the best performer through the day.
Key Highlights of the Report
Rise in government expenditure
Revival of imports, exports
Being the global capital for vaccine manufacturing, Indian pharma exports are also expected to receive a big impetus as vaccination drives start globally. The RBI says India must look for ways in which cash sitting idly in balance sheets of corporations and banks and reverse repo balances with the RBI finds its way into credit to productive sectors before it imposes a persistent deflationary weight on real activity.
SHAPES OF ECONOMIC RECOVERY Economic recovery can take many forms, which is depicted using alphabetic notations. For example, a Z-shaped recovery, V-shaped recovery, U-shaped recovery, elongated U-shaped recovery, W-shaped recovery and L-shaped recovery.
Z-shaped recovery: It is the most-optimistic scenario in which the economy quickly rises after an economic crash.
V-shaped recovery: It is the next-best scenario after Z-shaped recovery in which the economy quickly recoups lost ground and gets back to the normal growth trend-line.
U-shaped recovery: It is a scenario in which the economy, after falling, struggles around a low growth rate for some time, before rising gradually to usual levels.
W-shaped recovery: A W-shaped recovery is a dangerous creature. In this, growth falls and rises, but falls again before recovering, thus forming a W-like chart.
L-shaped recovery: In this, the economy fails to regain the level of GDP even after years go by.
J-shaped recovery: The growth rises sharply from the lows much higher than the trend-line and stays there.
Road Ahead
Source:https://timesofindia.indiatimes.com/business/india-business/rbi-sees-v-shaped-recovery-state-of-indian-economy-explained-in-10-charts/articleshow/80409686.cms
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