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Date : Mar 19, 2021
RBI Bulletin - March 2021

The Reserve Bank of India today released the March 2021 issue of its monthly Bulletin. The Bulletin includes one Speech, four Articles and Current Statistics.

The four articles are: I. State of the Economy; II. Unconventional Monetary Policy in Times of COVID-19; III. Union Budget 2021-22: An Assessment; and IV. Q2:2020-21 Estimates of Household Financial Savings and Household Debt-GDP Ratio.

I. State of the Economy

As countries rush to inoculate their populations, the global economy should regain lost momentum in Q2. Bond vigilantes could, however, undermine the recovery, unsettle financial markets and trigger capital outflows from emerging markets. The Reserve Bank is striving to ensure an orderly evolution of the yield curve, but it takes two to tango and forestall a tandav. There is a restless urgency in the air in India to resume high growth, with signs that the capex cycle is uncoiling and turning, and earnings results of corporates having beaten market expectations. Inflation has witnessed upside pressures.

II. Unconventional Monetary Policy in Times of COVID-19

  • The outbreak of COVID-19 posed enormous challenges for life and livelihood globally, warranting policy response from national governments and central banks at an unprecedented scale. Besides fiscal stimulus, several unconventional monetary policy tools (UMPTs) were deployed by central banks to unfreeze financial markets and revive economic activity.

  • This article presents a synoptic overview of various UMPTs deployed by central banks world-wide and their rationale. In the backdrop of the international experience, the article discusses several measures announced by the Reserve Bank and their efficacy in revitalising financial market activity.

  • Empirical analysis suggests significant announcement impact of long term repo operations (LTROs) and targeted long term repo operations (TLTROs) in money and bond markets while the announcement of special OMOs (Operation Twists) caused significant moderation of term premium in the G-sec market, thereby lowering funding costs and easing financial conditions.

III. Union Budget 2021-22: An Assessment

This article presents an assessment of the Union Budget 2021-22. The budget strikes the right chord by prioritising counter-cyclical investment-led fiscal support to post-COVID recovery in growth.


  • As against the budgeted gross fiscal deficit (GFD) of 3.5 per cent of GDP for 2020-21, the revised estimates (RE) for GFD stood at 9.5 per cent of GDP primarily due to cyclical revenue shortfall coupled with higher expenditure on account of on-budgeting of subsidies. The budgeted GFD for 2021-22 stands at 6.8 per cent of GDP on the back of a cut in revenue expenditure and higher disinvestment receipts.

  • Gross market borrowing through dated securities for 2021-22 is budgeted at ₹12.1 lakh crore as compared with ₹12.8 lakh crore in 2020-21 (RE). Apart from market borrowing, the National Small Savings Fund (NSSF) has also emerged as a significant source of financing, accounting for about 26 per cent of GFD. A notable change envisaged by this Budget is to end the practice of public sector undertakings accessing the NSSF. Due to higher borrowing in 2020-21 (RE), the centre’s debt-GDP ratio increased to 64.3 per cent, which is budgeted to be lower at 62.5 per cent in 2021-22.

  • Though the fiscal consolidation path has been stretched, the measures proposed in the Budget, if implemented well, could help in realising its intent, and be a game changer in achieving higher growth in the medium term.

IV. Q2:2020-21 Estimates of Household Financial Savings and Household Debt-GDP Ratio

In succession to the Reserve Bank’s November 2020 Bulletin article, “Preliminary Estimates of Household Financial Savings – Q1:2020-21”, this article provides estimates for Q2:2020-21 along with the estimate of households’ debt to GDP ratio. Major highlights of the article are presented below:


  • Preliminary estimates show a substantial waning of the household financial savings rate to 10.4 per cent of GDP in Q2:2020-21 from the high of 21.0 per cent in the immediately preceding quarter, as households switched from an ‘essentials only’ spending to discretionary spending with the gradual reopening/unlocking of the economy.

  • Household debt to GDP ratio, which has been steadily increasing since Q1:2018-19 rose sharply to 37.1 per cent in Q2:2020-21 from 35.4 per cent in Q1:2020-21.

  • The moderation in household financial savings has taken place despite an increase in their financial assets, as the flow of financial liabilities returned to positive territory on the back of loans from banks and NBFCs in Q2:2020-21.

  • Households’ financial savings rate might have fallen further in Q3:2020-21 with the intensification of consumption and economic activity.

(Yogesh Dayal)    
Chief General Manager

Press Release: 2020-2021/1272