As India faces the impact of the newly announced 50% US tariffs on labor-intensive exports, RBI Governor Sanjay Malhotra assures policy support for growth and affected sectors. He emphasizes liquidity management and investment revival needs.
RBI’s Assurance of Liquidity and Growth Support
During the FICCI-IBA annual banking conclave, Governor Malhotra highlighted the following key points:
- Support impacted sectors, especially those hit by US tariffs.
- Maintain ample liquidity in the banking system to facilitate credit growth.
- Collaborate with other policy instruments if adverse effects intensify.
This proactive stance aims to balance inflation control with growth facilitation, particularly in times of global trade disruptions.
Sluggish Credit to Industry: A Concern
Recent RBI data indicates:
- Industrial loan growth at the slowest pace since March 2022, rising by 5.49% year-on-year to Rs 39.32 lakh crore.
The slowdown is due to cautious private investment and risk-aversion by firms towards capital expenditure.
Sectors at Risk: Export-Oriented and Labour-Intensive
Key sectors affected by the US tariffs include:
- Textiles and Apparel
- Leather Goods and Footwear
- Gems and Jewellery
- Micro, Small, and Medium Enterprises (MSMEs)
These sectors, vital for India’s labor force, heavily rely on export revenues. The government is exploring fiscal measures to support them.
Export Exposure and Tax Coverage
Key points highlighted by Governor Malhotra:
- 45% of India’s export items are not taxed.
- Remaining 55% could face varying impacts, necessitating targeted sectoral support.
Call for Private Investment Revival
Governor Malhotra urges:
- Banks and corporates to drive fresh investments.
- Channeling India’s entrepreneurial spirit into productive growth.
This call comes amid a slowdown in corporate loan book growth, signaling delayed investment decisions by firms.
Key Takeaways for Competitive Exams:
- RBI Governor assures support for sectors affected by US tariffs.
- Focus on maintaining liquidity and driving investment revival for economic growth.
- Sectors like textiles, footwear, and MSMEs are at risk due to the impact of US tariffs.
- Need for targeted sectoral support and private investment to mitigate economic challenges.
