Rajeshwar Rao: Financial sector as an enabler for developed India

Keynote address by Mr Rajeshwar Rao, Deputy Governor of the Reserve Bank of India, at the 31st Annual Management Convention of Thrissur Management Association, Mumbai, 3 April 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

A very good evening to all of you. It is indeed a pleasure to be here and participate in the 31st annual management convention of Thrissur Management Association.

As Socrates once said, "The only true wisdom is in knowing you know nothing." Little did we know, three years back, that we would face one of the greatest challenges of our lifetime - a pandemic that would upend our daily lives and force us to navigate through unknown, unforeseen, and unanticipated turbulences. As we complete a tad over three years after the onset of the pandemic it might be an opportune moment to reminisce about the challenges and responses to the COVID times as well as stocktake some of the lessons learnt.

What comes to mind in the first place is that the uncertainty and upheavals seen during the last three years has been a first for this living generation. To dwell on the experiences, challenges and responses, let me begin by focussing on the global economic recovery post pandemic as well as in our country and thereafter, briefly, outline my views on the changes that pandemic brought in the financial world and what this transformation means for the Indian growth story going forward.

Restoration and Revitalization of the Economy

The stress induced by Covid was different from any other stress the world has seen before. The pandemic spread rapidly and affected almost every country in the world. For financial regulators, it was an out-of-syllabus situation as the economic stress this time was not caused by underlying economic imbalances or financial market failures, but by a public health crisis. This made it a unique shock, as it impacted both the supply and demand sides of the economy, affecting both production and consumption. The impact was such that global GDP contracted by 3.5% in 2020. India's GDP contracted by 5.8% in the financial year 2020-21, making it the worst economic contraction in country's history. The recession was highly synchronized - more than 90 per cent of economies, even higher than the proportion of about 85 per cent of countries in recession at the height of the Great Depression of 1930-32, witnessed a recession.