Reserve Bank of India Governor Shaktikanta Das on Friday said that India's FY20 GDP growth projection of 4.4 percent is at risk and the outlook for FY21 is unclear amid the spread of the coronavirus pandemic.
Reserve Bank of India Governor Shaktikanta Das on Friday said that no projection for growth and inflation was being given in view of the uncertainty surrounding due to the outbreak of the deadly novel coronavirus or COVID-19 pandemic. The Reserve Bank in its monetary policy usually provides projections for growth and inflation.
Announcing the decisions of the Monetary Policy Committee (MPC), Das said the performance of these two key macroeconomic parameters in the days ahead would depend upon the intensity, spread and duration of COVID-19.
“The implied real GDP growth of 4.7 percent for Q4:2019-20 in the second advance estimates of the National Statistics Office, released in February 2020, within the annual estimate of 5 per cent for the year as a whole is now at risk from the pandemic’s impact on the economy. As regards the outlook for 2020-21, apart from the continuing resilience of agriculture and allied activities, most other sectors of the economy will be adversely impacted by the pandemic, depending upon, I repeat, its intensity, spread and duration,” the RBI Governor said in a video press briefing.
On the global economy, the governor said that slowdown could deepen impacting the growth prospects everywhere in the world.
Global slowdown could make things difficult for India too, despite some help from falling crude prices, Das said, adding food prices may soften even further on record crop production.
The RBI said it has decided to retain its accommodative stance as long as it is necessary to revive growth and mitigate the impact of coronavirus on the economy.
ALSO READ: RBI Moratorium FAQs
It cut the repo rate by 75 basis points to 4.40 percent, exceeding market expectations for a 50 basis point cut. The reverse repo rate was reduced 90 basis points to 4 percent. While the entire committee favoured a cut, they differed on the size of the cut, and voted in a 4-2 split to cut rates by this quantum, the RBI said.
“The MPC noted that macroeconomic risks both on the demand and supply side brought on by the pandemic could be severe. The need of the hour is to do whatever is necessary to shield the domestic economy from the pandemic," Das said.
This was the first time in five years that the RBI has acted outside the scheduled dates for policy meetings. The MPC was originally scheduled to meet in early April. The last time RBI cut rates in an out-of-turn move was in March 2015 following a budget announcement.
ALSO READ: RBI MPC Key highlights
Shaktikanta Das' address to the media came a day after Finance Minister Nirmala Sitharaman announced Rs 1.7 lakh crore package of free foodgrains and cash doles to the poor to deal with the economic impact of the unprecedented 21-day nationwide lockdown.
First Published: IST