shaktikanta das : what forces could drive the recovery? address by mr shaktikanta das, governor of the reserve bank of india, at the ficci ’ s national executive committee meeting, 16 september 2020 * * * 1. thank you for this opportunity to interact with eminent business leaders of india and distinguished members of the ficci. i wish to thank the organisers for hosting this event, undeterred by this still unfolding pandemic that, on a daily basis, tests our resilience and capacity to save lives, households, businesses and the economy. 2. the end - august press release of the national statistics office ( nso ) was a telling reflection of the ravages of covid - 19. nevertheless, high frequency indicators of agricultural activity, the purchasing managing index ( pmi ) for manufacturing and private estimates for unemployment point to some stabilisation of economic activity in q2, while contractions in several sectors are also easing. the recovery is, however, not yet fully entrenched and moreover, in some sectors, upticks in june and july appear to be levelling off. by all indications, the recovery is likely to be gradual as efforts towards reopening of the economy are confronted with rising infections. 3. the global economy is estimated to have suffered the sharpest contraction in living memory in april - june 2020 on a seasonally adjusted quarter - on - quarter basis. world merchandise trade is estimated to have registered a steep year - on - year decline of more than 18 per cent in q2 of 2020, according to the goods trade barometer of the world trade organisation ( w to ). high frequency indicators point to a trough in global economic activity in april - june quarter and a subsequent recovery is underway in several economies, such as the usa, uk, euro - area and russia. the global manufacturing and services pmis rose to 51. 8 and 51. 9, respectively, in august from 50. 6 for both in july. yet, infections remain stubbornly high in the americas and are increasing again in many european and asian countries, causing some of them to renew containment measures. 4. on the back of large policy stimulus and indications of the hesitant economic recovery, global financial markets have turned upbeat. equity markets in both advanced and emerging market economies have bounced back, scaling new peaks after the ‘ covid crash ’ in februarymarch. bond yields have hardened in advanced economies on improvement in risk appetite, fuel

expected outcomes, we note that this should not be interpreted as, nor convey the message that, the fund ’ s recommendations are always correct or that member countries ’ authorities always take a defensive attitude. we believe deeply in a policy dialogue process that could be beneficial to both parts. at the end, successful policies are those implemented by economic authorities that feel them their own and are capable to create the political framework for their execution. we also support a more systematic focus of the fund ’ s surveillance on regional developments by detecting regional trends and fostering dialogue with region - wide institutions such as eclac. along these lines, we appreciate the fund ’ s regional outlook report, whose last issue was simultaneously launched in mexico city and santiago in early november. as a central bank fully committed to an inflation - targeting framework, we place substantial weight on making continuous efforts in strengthening transparency. in this direction, we think that the fund ’ s communication strategy would be more effective if analysis goes beyond the mere publication of reports, making it an integral part of the public debate on policies and economic reforms. considering the importance of communications, we believe that enhancing the fund ’ s outreach activities both at global and regional level will strengthen the effectiveness of the fund ’ s monitoring and surveillance. the risks the world economy faces in the medium term - associated to an abrupt resolution of global imbalances, a commodity price downturn, a slowdown of global growth, or an abrupt shift in risk perception and valuation by global investors - require that the agenda on international financial architecture be focused more on preventing, rather than resolving crises ex post. as countries are progressively more integrated into a more global financial system, new challenges emerge for economic authorities. the increased mobility of international capital flows - beyond their potential benefits - entails the risks of sudden and unexpected reversal of capital flows that could be further worsened by the contagion associated to the financial market reaction. also, in the current market - driven international environment, characterized by increasing access of emerging economies to private funding, and by a more complex international financial system, externalities, market failures and perverse incentive effects are still in place and impede private financial flows to become a permanent and stable source of financing. therefore, strengthening countries ’ resilience is not only about developing and improving appropriate and consistent policies and institutions, but also about providing countries with access to emergency liquidity and the possibility to obtain short - term liquidity by private financial instruments. the fund should therefore play a leading role in facilitating