- According to the annual report of the RBI,the lack of domestic demand is holding back the animal spirits in the economy.
- Animal spirit is a term used by the British economist,John Maynard Keynes to describe how people arrive at financial decisions including buying and selling securities in times of economic stress or uncertainty.
- The report has said that the economic slowdown could be cyclical in nature rather than a deep structural one.But there are some crucial structural issues in land, labour, & agricultural marketing that require urgent reforms.
- The report has also emphasised on the need to revive consumption demand and private investment during 2019-20.
- This can be revived by (a)strengthening the banking and non-banking sectors (b)big push for spending on infrastructure (c)implementation of much needed structural reforms in the areas of labour laws, taxation and (d)other legal reforms.
- Further,the report has said that the Gross Non-Performing Assets (GNPA) ratio of the banking system has declined to 9.1% in March this year from 11.2% in the previous year which is a healthy sign for the financial system.
- However,the report has said that non-banking financial companies (NBFC) are under stress due to irrational exuberance and considerable overleveraging with asset-liability mismatches.
