Inflation And Financial Stability Concerns In India Limit Room For Central Bank To Cushion Economic Activity From COVID-19 Shock: OECD
Significant Monetary & Liquidity Measures To Help Spur Economic Activity Once Normalcy Is Restored: RBI
The Reserve Bank Governor Shaktikanta Das noted in a statement accompanying the monetary policy update today that the Indian economy is entering into a decisive phase in the fight against the pandemic. Relative to pre-COVID levels, several high frequency indicators are pointing to the easing of contractions in various sectors of the economy and the emergence of impulses of growth. In the September 2020 round of the RBI's survey, households expect inflation to decline modestly over the next three months, indicative of hope that supply chains are mending. Our projections indicate that inflation would ease closer to the target by Q4:2020-21. Our other surveys, also conducted in September, indicate that consumer confidence is turning upbeat on the general economic situation, employment and income over a one year ahead horizon.
The modest recovery in various high-frequency indicators in September 2020 could strengthen further in the second half of 2020-21 with progressive unlocking of economic activity. Agriculture and allied 5 activities could well lead the revival by boosting rural demand. Manufacturing firms expect capacity utilisation to recover in Q3:2020-21 and activity to gain some traction from Q3 onwards. Both private investment and exports are likely to be subdued, especially as external demand is still anaemic. For the year 2020-21 as a whole, therefore, real GDP is expected to decline by 9.5%, with risks tilted to the downside. If, however, the current momentum of upturn gains ground, a faster and stronger rebound is eminently feasible.
Powered by Capital Market - Live News
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)