India's GDP growth in FY21 to remain negative, says RBI's Shaktikanta Das

Reserve Bank of India Governor Shaktikanta Das said that India's GDP growth is likely to remain in the negative zone in FY21. Governor Das said at the RBI press conference on Friday that the growth might pick up in the second half of FY 2020-21.

"The GDP growth for 2020-21 is expected to remain in the negative territory with some pick up in growth impulses in H2 2021 onwards. The end-May 2020 release of NSO on national income would provide greater clarity, enabling more specific projections of GDP growth in terms of both magnitude and direction. Much will depend on how quickly the COVID curve flattens and begins to moderate. As the nation prepares for this future, the words of Mahatma Gandhi should inspire us to fight on -- We may stumble and fall but shall rise again," said Das.

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Moreover, the Monetary Policy statement mentioned, "Even though the lockdown may be lifted by end-May with some restrictions, economic activity even in Q2 may remain subdued due to social distancing measures and the temporary shortage of labour. Recovery in economic activity is expected to begin in Q3 and gain momentum in Q4 as supply lines are gradually restored to normalcy and demand gradually revives." It further added that there is heightened uncertainty about the duration of the pandemic and how long social distancing measures would remain in place. As a result, downside risks to domestic growth remain significant, said the RBI MPC. Reiterating Governor Das the statement added that upside impulses could be unleashed if the pandemic is contained.

The Governor during the press conference warned of a highly uncertain inflation outlook and said that the supply shock in April is likely to persist for the next coming months.

Das said that the biggest blow to the economy has come from the slump in private consumption. Consumer durables production has decreased 33 per cent in the month of March.  He added that the domestic economic activity has been severely contracted in the last two months under the coronavirus lockdown. However, the agricultural sector has offered a ray of hope.

The Governor said that India is facing a crisis as there has been loss in production as well as a crash in demand. Power and fuel consumption has plunged, he said. The top six states contributing to manufacturing is in red, he added.

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