India’s central bank projects 10.5% growth, leaves lending rates unchanged
Srinagar, India, Feb 5 (efe-epa).- India’s economy is expected to grow at 10.5 percent in the next financial year, its central bank said on Friday, as signs of recovery have strengthened after a record-breaking slump caused by the coronavirus.
Reserve Bank of India Governor Shantikanta Das also announced that they had left policy lending rates unchanged at a record low level of 4 percent to support the recovery and “ensure the availability of ample liquidity in the system.”
“Signs of recovery have strengthened further,” Das said in a virtual press briefing after the bank held a monetary policy review in Mumbai.
He said indicators suggest that the list of normalizing sectors was expanding and consumer confidence was reviving while business expectations of manufacturing, services, and infrastructure remained upbeat.
“Taking these factors into consideration, real GDP growth is projected at 10.5 percent in 2021-22,” Das said.
He said it remained “our strong conviction” that in 2021-22 India would undo the damage that Covid-19 had inflicted on the economy.
“After the chaos and despair of the year gone by, through which we have sailed together and shall continue to sail ahead, the overall situation” will make “the phenomenon of the impossible of yesterday becoming the possible of today.”
Analysts generally hailed the bank’s decision to keep the lending rates on hold.
The RBI forecast is marginally lower than the government’s strong prediction of 11 percent for 2021-22 in its annual economic survey released at the end of last month that details the state of the economy and steps needed to accelerate growth.
The International Monetary Fund had also estimated an 11.5 percent expansion that is likely to make India the world’s fastest-growing major economy ahead of China at an 8.1 percent growth rate.
The central bank projection comes days after India unveiled what Finance Minister Nirmala Sitharaman claimed was a “budget like never before” on Monday for the next financial year that begins Apr.1.
Sitharaman pegged the current year’s fiscal deficit or a shortfall in a government’s income compared with its expenditure at a whopping 9.5 percent of gross domestic product.
She set a fiscal deficit target of 6.8 percent of GDP for the next year.
According to the government’s survey, India’s GDP contracted by a record 23.9 percent between April and June and 7.5 percent in the second quarter of the last year.
The survey estimated a contraction of 7.7 percent for the current financial year ending Mar.31 due to the hit caused by the coronavirus pandemic and job losses for millions of workers.
Despite strong recovery indications, the government report also cautioned that it would take at least two years for India to go back to pre-pandemic growth levels. EFE-EPA