he central bank had estimated GDP to contract by 9.5 per cent in its assessment in October
The Reserve Bank of India revised the real GDP growth projection for 2020-21 from -9.5 per cent to -7.5 per cent, the Governor Shaktikanta Das said in an online briefing at the end of the meeting of the Monetary Policy Committee. The central bank had estimated GDP to contract by 9.5 per cent in its assessment in October. The RBI Governor also exuded confidence that the economy will witness positive GDP growth in the second half of FY21.
The upward revision in the GDP projection comes days after RBI Governor Shaktikanta Das said the economy is showing a stronger-than-expected pickup in recovery, but one needs to be watchful of the sustainability of demand.
The GDP estimates are also in line with economists’ expectation of a revision in the central bank’s growth projections, following the better-than-expected contraction in the September quarter.
The latest economic projections confirmed the government’s view that the economy is in a V-shaped recovery, with the GDP contraction easing to 7.5 per cent in the July-September period from a record 23.9 per cent in the previous quarter.
The revised projection comes in the backdrop of the RBI’s decision to maintain an “accommodative” policy stance in its fifth bi-monthly monetary policy for FY21.
The Reserve Bank of India’s Monetary Policy Committee maintained the key lending rate unchanged at 4 per cent, holding the rates at existing levels for a third straight review. Since May, the repo rate – or the key interest rate at which the RBI lends money to commercial banks – has been kept steady at a 19-year low of 4 per cent. The reverse repo rate – the rate at which the RBI borrows from banks – will continue to be 3.35 per cent.
The status quo on monetary policy was expected by most economists, amid high levels of inflation and shrinking gross domestic product (GDP).
Inflation has remained consistently above the upper end of RBI’s mandated 2-6 per cent target range every month barring March this year while core inflation has also remained sticky.
Retail inflation in the country rose to the highest level in October in more than six years due to higher food prices. According to Consumer Price Index (CPI) data released by the Ministry of Statistics and Program Implementation, inflation stood at 7.61 per cent in October, which was the highest level since May 2014.
