The monetary policy committee of the Reserve Bank of India has unanimously decided to keep the key lending rates unchanged, Governor Shaktikanta Das said on Friday.
RBI keeps benchmark interest rates unchanged, GDP contracting by 9.5% in FY2020-21. The central bank announces a series of measures to enhance liquidity support to financial markets.
World Bank on Thursday said that India’s GDP is expected to contract by 9.6 per cent this fiscal which is reflective of the national lockdown and the income shock experienced by households and firms due to the COVID-19 pandemic, noting that the country’s economic situation is “much worse” than ever seen before.
India’s GDP is expected to contract by 9.6 per cent in the fiscal year that started in March,” the World Bank said in the report released. Regional growth is projected to rebound to 4.5 per cent in 2021, it said. Factoring in population growth, however, income-per-capita in the region will remain 6 per cent below 2019 estimates, indicating that the expected rebound will not offset the lasting economic damage caused by the pandemic, it said. “The situation is much worse in India than we have ever seen before,” Hans Timmer, World Bank Chief Economist for South Asia told reporters during a conference call. “It is an exceptional situation in India. A very dire outlook,” he said.
There was a 25 per cent decline in GDP in the second quarter of the year, which is the first quarter of the current fiscal year in India.
In the report, the World bank said that the spread of the coronavirus and containment measures have severely disrupted supply and demand conditions in India.
Prime Minister Narendra Modi, with effect from March 25, announced a nationwide complete lockdown that brought as much as 70 per cent of economic activity, investment, exports and discretionary consumption to a standstill. Only essential goods and services such as agriculture, mining, utility services, some financial and IT services and public services were allowed to operate. Dubbed as the world’s biggest lockdown, it shut a majority of the factories and businesses, suspended flights, stopped trains and restricted movement of vehicles and people.
RBI Gov Das adds,Undeterred by the pandemic, rural economy has been resilient. Early estimates suggest foodgrain production is set to cross another record in 2020-21.
Migrant labour is returning to work in urban areas, factories and construction activity are coming back to life. Online commerce is booming, and people are getting back to offices, Mr. Das listed.
Mr. Das said he expects Q4 to record a positive growth. “The modest recovery in high-frequency indicators in September will further improve in the second half of this year,” he added.
For 2020-21, real GDP is expected to contract by 9.5% with risks on the downside. Our assessment is that inflation will remain elevated in September but ease gradually in Q3 and Q4, he said.