Context: Cautioning that India’s potential output may undergo a structural downshift following the pandemic, the Reserve Bank on Tuesday made a strong case for deep-seated and wide-ranging reforms to regain losses and return to the path of sustainable economic growth.

Details:

• The COVID-19 pandemic will inflict deep disfiguration on the world economy and the shape of the future will be heavily contingent upon the evolving intensity, spread and duration of COVID-19 and the discovery of the elusive vaccine, the RBI said in its ‘assessment and prospects’ which forms part of the central bank’s Annual Report for the year 2019-20.
• Post-COVID-19, the overwhelming sense is that the world will not be the same again and a new normal could emerge, the Reserve Bank of India (RBI) said.
• In a post-pandemic scenario, deep-seated and wide-ranging structural reforms in factor and product markets, the financial sector, legal architecture, and in international competitiveness would be needed to regain potential output losses and return the economy to a path of strong and sustainable growth with macroeconomic and financial stability
• Moreover, this recovery is likely to be different as the global financial crisis occurred after years of robust growth with macroeconomic stability; by contrast, COVID-19 has hit the economy after consecutive quarters of slowdown, it added.

Reserve Bank of India

• The Reserve Bank of India is India's central bank, which controls the issue and supply of the Indian rupee. RBI is the regulator of the entire Banking in India. RBI plays an important part in the Development Strategy of the Government of India.
• Headquarters: Mumbai

Reference: https://www.thehindu.com/business/Economy/rbi-calls-for-deep-seated-wide-ranging-reforms-for-sustainable-growth/article32435753.ece#:~:text=%E2%80%9CIn%20a%20post%2Dpandemic%20scenario,strong%20and%20sustainable%20growth%20with

ECONOMY

Govt. open to more tweaks in ₹3 lakh crores credit guarantee scheme

Context: Finance Minister Nirmala Sitharaman said that the government is open to further tweaking the ₹3 lakh crores credit guarantee scheme for providing collateral-free loans to small businesses.

Details:

• According to industry association CII, sectors like tourism, real estate, hospitality, and airlines have been affected “disproportionately” by the COVID-19 pandemic.
• Structural reform is a key priority for the government and it will move fast on the Cabinet-cleared disinvestment proposals, including that of banks.
• The (₹) 3 Lakh Crores scheme is open for professionals now and Government is open to more tweaking, changes if required.
• Earlier the government had widened the scope of the ₹3-lakh crores credit guarantee scheme by doubling the upper ceiling of loans outstanding to ₹50 crores and including certain individual loans given to professionals like doctors, lawyers and chartered accountants for business purposes under its ambit, apart from MSMEs.
• With post-COVID reset happening, data-driven manufacturing models and newer investments can happen in FinTech.

 Emergency Credit Line Guarantee Scheme (ECLGS)

 About ECLGS

• Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs. 3 lakh crores to eligible MSMEs and interested MUDRA borrowers.
• The credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
• The Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020.

Reference: https://www.thehindu.com/business/Economy/govt-open-to-more-tweaks-in-rs-3-lakh-cr-credit-guarantee-scheme-fm/article32437989.ece#:~:text=Govt.-,open%20to%20more%20tweaks%20in%20%E2%82%B9,cr%20credit%20guarantee%20scheme%3A%20FM&text=Finance%20Minister%20Nirmala%20Sitharaman%20on,free%20loans%20to%20small%20businesses.

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