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RBI projects FY21 real GDP contraction at 7.5%

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RBI projects FY21 real GDP contraction at 7.5%

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The Reserve Bank of India has projected FY21 real GDP contraction at 7.5 percent as against an expectation of 9.5 percent contraction earlier.

RBI projects FY21 real GDP contraction at 7.5%
The Reserve Bank of India has projected FY21 real GDP contraction at 7.5 percent as against an expectation of 9.5 percent contraction earlier.
Announcing its bi-monthly monetary policy, RBI Governor Shaktikanta Das said that the economy is expected to witness positive GDP growth in the second half of FY21 (H2FY21).
RBI sees Q4FY21 GDP at +0.7 percent versus +0.5 percent earlier. The Q3FY21 GDP growth is projected at 0.1 percent.
"The recovery in rural demand is expected to strengthen further, while urban demand is also gaining momentum. Consumers remain optimistic about the outlook and the business sentiment of manufacturing firms is gradually improving," RBI Governor Das said.
He noted that the fiscal stimulus was increasingly moving beyond being supportive of consumption and liquidity to supporting growth-generating investment. On the other hand, private investment is still slack and capacity utilization has not fully recovered, he added.
"While exports are on an uneven recovery, the prospects have brightened with the progress on the vaccines. Taking these factors into consideration, real GDP growth is projected at (-) 7.5 percent in 2020-21: (+) 0.1 percent in Q3:202021 and (+) 0.7 percent in Q4:2020-21; and 21.9 percent to 6.5 percent in H1:202122, with risks broadly balanced," Das said.
The Monetary Policy Committee (MPC) kept the repo rate unchanged in the December policy. With no change this time as well, the repo rate currently stands at 4 percent. The reverse repo rate has been maintained at 3.35 percent.
RBI December Monetary Policy: Central bank leaves repo rate unchanged at 4%
The MPC voted unanimously to keep policy rates unchanged.
The central bank has maintained its policy stance at “accommodative” which could continue for as long as necessary to revive growth.
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