RBI maintains status quo:
The RBI has decided to keep policy rates unchanged in its first MPC meeting of 2021. The committee has maintained the repo rate at 4% and the reverse repo rate at 3.35%. The central bank has also continued with its 'accommodative' policy stance.
It had last revised its policy rate on May 22 when COVID-19 led chaos struck the economy. But, Since February 2020, it has given a rate cut of 115 basis points.
The decision to keep the REPO and reverse REPO rate unchanged is in line with expectations. It will help the excess flow of liquidity to continue and help the economy to stay on a revival path. On the counter side though, there are chances of demand-side inflation picking up in the country.
The execution:
The type of response that the budget has received is a dream for any finance minister. There are a few discrepancies over the increased number of capex. But overall, the announcements are really exciting and in line with long term demands.
The ideas like a bad bank or Development finance institutions (DFIs) were under discussion for a long time. They have been finally unleashed now after several committees submitting hundreds of reports on them. Privatization of public banks is added to the long list of pending proposals like BPCL, AirIndia, LIC, Concor and many more. It all shows a great intent to bring the economy back from the brink.
However, Intention is one thing and execution is another. Here is where the government has been far from efficient in the past. The budget speech is long over but the real test will start from March onwards when it is the time for execution.
Indian aviation seeing gradual recovery :
Remi Maillard, President and Managing Director, Airbus India and South Asia, in a recent statement stated that the Indian aviation sector is showing positive signs after being completely shut down.
As per him, Indian domestic airlines are currently operating at 60% of the pre-COVID levels. This is better than most countries in the world.
There are a few positive signs like demand for leisure travel. Business travellers have also started to come back.
While the recovery is always a positive sign, it has been slow. Indian airlines are flying at only 60% of pre-covid levels. Hence, there is a long way to go to achieve pre-covid level normalcy. We believe it will take a long time to go back to the pre-covid levels.
We see that ticket prices are also fearing at above-average levels as airlines have to cover up for flying with lower capacity. It is also a major factor keeping the fliers away.
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