The outlook for India’s economic recovery has been sharply altered by the COVID-19 outbreak, the Reserve Bank of India said in its Monetary Policy Report, underlining the pandemic’s intensifying impact on South Asia’s engine of growth.
“Before the outbreak of Coronavirus pandemic, the outlook for growth for 2020-2021 was looking up” said the Central Bank.
“The Coronavirus pandemic has drastically altered this outlook. The world economy is expected to plunge into recession in 2020, as post COVID projections indicate.”
The country’s economy expanded at its slowest pace in more than six years from October to December, last year and was forecasted to clock in full-year growth of 5 per cent which would be the lowest in over a decade.
The nationwide lockdown is set to impact march quartergrowth. Moreover, analysts have cut their 2020/21 GDP growth projections to 1.5 to 2 per cent, levels unseen in the country in decades.
Any gains seen in the terms of trade from a prolonged economic downturn in the price of international crude is also not likely to offset the economic drag from the coronavirus induced lockdown of the country and loss of external demand, the Reserve Bank of India said.
“While efforts are being scaling up on a war footing to stop its spread, COVID-19 would impact economic activity in our country directly through domestic lockdown. The other effects would operate through a severe slowdown in world trade and growth,” the Reserve Bank of India added.
The Central Bank, as it did in its policy statement last month, reiterated that conditions remained highly uncertain and said it is refraining from providing any projections on GDP growth.
Describing the present environment as “highly fluid”, the Reserve Bank of India stated that it is assessing the “intensity, spread and duration of COVID – 19.”
“Significant monetary and liquidity measures taken by the Central Bank and fiscal measures by the government would mitigate the adverse impact on domestic demand and help spur economic activity once normalcy is restored,” it added.
India has reported over 5000 active coronavirus cases and 166 deaths as of today.