The COVID-19 pandemic has had a severe impact on the Indian economy. The pandemic has caused a sharp decline in economic activity, leading to job losses and a decline in incomes. The pandemic has also disrupted supply chains, making it difficult for businesses to operate.
The severity of the pandemic can be seen in the following data:
- The GDP growth rate in India fell to -24.4% in Q1 FY2021.
- The unemployment rate in India rose to 23.5% in May 2020.
- The number of people living below the poverty line in India is estimated to have increased by 23 million in 2020.
RBI Initiatives
The Reserve Bank of India (RBI) has taken a number of initiatives to mitigate the impact of the pandemic on the Indian economy. These initiatives include:
- Reducing interest rates: The RBI has cut the repo rate by a total of 75 basis points since the start of the pandemic. This has made it cheaper for businesses and individuals to borrow money.
- Increasing liquidity: The RBI has increased the amount of money in the banking system by purchasing government bonds. This has helped to keep interest rates low and to make it easier for businesses and individuals to access credit.
- Providing credit relief: The RBI has allowed banks to restructure loans for businesses and individuals who are struggling to repay their debts. This has helped to prevent businesses from going bankrupt and to protect the jobs of workers.
- Providing guarantees: The RBI has provided guarantees to banks for loans to businesses. This has helped to encourage banks to lend to businesses, even if they are considered to be risky.
Multiple Choice Questions
- Which of the following is not a measure taken by the RBI to mitigate the impact of the pandemic?
- Reducing interest rates.
- Increasing liquidity.
- Providing credit relief.
- Providing guarantees.
- The answer is Providing guarantees.
- Which of the following is the most effective measure taken by the RBI to mitigate the impact of the pandemic?
- Reducing interest rates.
- Increasing liquidity.
- Providing credit relief.
- Providing guarantees.
- There is no single most effective measure.
- The answer is There is no single most effective measure.
- What is the goal of the RBI’s initiatives?
- To mitigate the impact of the pandemic on the Indian economy.
- To prevent businesses from going bankrupt.
- To protect the jobs of workers.
- All of the above.
- The answer is All of the above.
- How has the RBI’s initiatives helped the Indian economy?
- The GDP growth rate has improved.
- The unemployment rate has declined.
- The number of people living below the poverty line has decreased.
- All of the above.
- The answer is All of the above.
- What are the challenges faced by the RBI in implementing its initiatives?
- The RBI has limited resources.
- The RBI needs to balance the need to support the economy with the need to control inflation.
- The RBI needs to ensure that its initiatives are effective and do not lead to moral hazard.
- All of the above.
- The answer is All of the above.