Rising probability that large parts of world will slip into recession due to COVID-19: RBI Governor

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said that Monetary Policy Committee (MPC) has taken note of the global economic activity coming to a near standstill due to the coronavirus pandemic and added that large parts of the world could slip into recession in the coming days to the coronavirus crisis.

"The MPC noted that global economic activity has come to a near stand-still as COVID-19 related lockdowns and social distancing are imposed across a widening swath of affected countries. Expectations of a shallow recovery in 2020, from 2019's decade low in global growth, have been dashed," Das said.

"The outlook is now heavily contingent upon the intensity, spread and duration of the pandemic. There is a rising probability that large parts of the world will slip into recession," he added.

The RBI Governor further added that "the implied GDP growth of 4.7 per cent in Quarter 4 of 2019-20, in the second advance estimates of the National Statistics Office which was released in February 2020, within the annual estimate of 5 per cent for the year as a whole is now at risk."

As per the outlook for the year 2020-21, Das said, "Apart from continuing resilience of agriculture and allied activities most other sectors of the economy will be adversely impacted by the pandemic depending upon, its intensity, spread and duration."

Das also announced a reduction in the repo and reverse repo rates for banks.

"The repo rate has been reduced by 75 basis points to 4.4 per cent. The reserve repo rate has been reduced by 90 basis points to 4 per cent," Das said addressing the media.

The decision for "a sizeable reduction" in the policy repo rate, according to the RBI Governor was taken to "revive growth and mitigate the impact of COVID-19 and ensure financial stability.