India`s overall growth projected at minus 4.5% for 2020-21: RBI

RBI said global growth is projected at (-) 6.0 per cent in the single hit scenario and (-) 7.6 per cent in the double hit scenario.

New Delhi: The Reserve Bank of India (RBI) said on Tuesday its 2019-20 annual report, wherein it has stated that India’s growth is projected at minus 4.5 percent for 2020-21.

“In its latest update (June 2020), the IMF has projected global growth at (-) 4.9 per cent for 2020, with a steeply negative impact on economic activity in H1 and more gradual recovery than expected earlier. India’s growth is projected at (-) 4.5 per cent for 2020-21. The projections set out by the OECD on June 10, 2020 present two scenarios – single hit and double hit - the latter being one in which a second wave of rapid contagion erupts later in 2020,” the RBI report said.

It further added, “Global growth is projected at (-) 6.0 per cent in the single hit scenario and (-) 7.6 per cent in the double hit scenario [India’s growth is projected at (-) 3.7 per cent and (-) 7.3 per cent, respectively, in 2020-21]. In the Global Economic Prospects, the World Bank has projected the deepest global recession in eight decades in 2020, almost three times as steep as the global recession of 2009, despite unprecedented policy support. Some developments suggest that the shrinkage of world trade may be bottoming out in the third quarter of 2020.”

The Central Bank cited its August 2020 MPC meeting that noted the heightened uncertainty surrounding the macroeconomic outlook on account of supply chain disruptions and cost push pressures.

It expected headline inflation to remain elevated in Q2:2020-21, but likely to ease in H2:2020-21, aided by favourable base effects. As regards the outlook for growth, the MPC expected real GDP growth for the year 2020-21 as a whole to be negative, the RBI report said.

RBI has asked for wide-ranging reforms to regain losses due to COVID-19 crisis adding that it will take quite some time to mend and regain the pre-COVID-19 momentum.

“…assessment of aggregate demand during the year so far suggests that the shock to consumption is severe, and it will take quite some time to mend and regain the pre-COVID-19 momentum,” RBI added.