‘Recovery faster than anticipated’
MUMBAI: Reserve Bank of India governor Shaktikanta Das on Friday said the economy is recuperating faster than anticipated and growth rate is likely to turn positive in the second half of the current financial year.
In the year as whole, the economy is likely to contract by 7.5%, which is an improvement over RBI’s previous projection of 9.5% contraction, the governor said while unveiling the bi-monthly monetary policy review.
The economy contracted by 23.9% in the first quarter and 7.5% in the second quarter on account of the Covid-19 pandemic.
Observing that the prospects of growth have brightened with the progress on the vaccine front, Das said, the economy was likely to record a growth of 0.1% in Q3 and 0.7% in Q4.
“Data that have become available for Q3: 2020-21 confirm that the economy is recuperating faster than anticipated and more sectors are joining the multi-speed upturn that I had highlighted in my statement in October,” Das added.
As per RBI, real GDP growth is projected at (-) 7.5% in 2020-21, (+) 0.1% in Q3 2020-21, and (+) 0.7% in Q4 2020-21; and 21.9% to 6.5% in H1 2021-22, with risks broadly balanced. In its October monetary policy statement, RBI had said the real GDP growth in 2020-21 is expected to be negative at 9.5%, with risks tilted to the downside: 9.8% in Q2:2020-21; 5.6% in Q3; and 0.5% in Q4.
The RBI governor further said the growth impulses that have emerged augur well for the revitalisation of the Indian economy. Policy stimuli by the government and the RBI are intended to nurture these growth spurts to greater strength. Efforts are underway to ensure a calibrated unlocking of the economy, with cognisance and caution about the virus, he said.
“While we remain vigilant, we must now turn to alleviating the scars left by the pandemic and revive the economy. The horizon has lighted up with the spate of positive news on the vaccines, and a steady rise in recoveries. India’s time has come to break free of the fetters of Covid-19 and reconfigure our destiny,” Das added.
Das also noted that the recovery in rural demand is expected to strengthen further, while urban demand is also gaining momentum. Consumers remain optimistic about the outlook and business sentiment of manufacturing firms is gradually improving. He said the fiscal stimulus is increasingly moving beyond being supportive of consumption and liquidity to supporting growth-generating investment. However, private investment is still slack and capacity utilisation has not fully recovered. While exports are on an uneven recovery, the prospects have brightened with the progress on the vaccines.