Former President of the New Development Bank of the BRICS countries, K V Kamath, on Tuesday said that the Indian economy is recovering better than he would have thought three months ago.
He was talking to an Indian business news channel.
Kamath, who submitted a framework for resolution of Covid-19 hit loans to the Reserve Bank of India on Monday, said that jobs will come back once the economy rebounds.
“Banks should be able to meet the challenges on the retail front with the leeway given by RBI,” Kamath added.
India reported the worst contraction in economic growth in the last 40 years last week.
For the months of April-May this year, which comprise the first quarter (trimester) of the current financial year, GDP fell by 23.9 percent, according to data released by the Indian government.
The economy had been slowing down even before the pandemic hit the country.
“Last two quarters (April-June and January-March ) were impacted the most due to Covid-19. Virtually all of India was shut over the past two quarters,” Kamath said, adding that almost 72 percent of bank loans were impacted in the period.
On 6 August, the RBI formed a committee headed by Kamath to suggest a resolution mechanism for companies finding it difficult to repay bank loans on account of disruptions caused by the pandemic.
Under the resolution mechanism submitted on Monday, the panel has identified 26 sectors for restructuring. These sectors include retail and wholesale trade, textile, roads, engineering, petroleum, coal production and ports and tourism.
Finance ministry sources estimate that loans worth $115 billion are likely to be restructured in the wake of the pandemic.
India has been witnessing a consistent decline in its GDP over the last two years due to issues pertaining to its financial market, and the impact of the US-China trade war. The country’s GDP growth came down from the peak of 8.2 percent in early 2018 to 3.1 percent in January – March this year.