Srinagar, India, Oct 9 (efe-epa).- India’s central bank on Friday said the coronavirus-induced deep economic slowdown was already “behind us” after a 23.9 percent plunge in the first quarter of the current fiscal year, and the real decline would be around 9.5 percent in 2020-21.
Addressing a virtual press conference, Reserve Bank of India (RBI) Governor Shaktikanta Das said the bank had decided to leave key interest rates unchanged at 4 percent.
The bank also left the reverse repo rate or the key borrowing at 3.35 percent, which has been slashed by 115 basis points since late March.
Das said the bank, however, retained an “accommodative” monetary policy stance to support the coronavirus-hit economy “as long as necessary” for growth.
The stance, he said, would continue “at least during the current financial year and into the next year – to revive growth on a durable basis and mitigate the impact of Covid-19.”
He said the Indian economy was entering “into a decisive phase in the fight against the pandemic.”
“By all indications, the deep contractions of Q1:2020-21 are behind us, silver linings are visible in the flattening of the active caseload curve across the country. Barring the incidence of a second wave, India stands poised to shrug off the deathly grip of the virus and renew its tryst with its pre-covid growth trajectory,” Das said.
The central bank chief said contractions that had hit various sectors of the economy had already started easing and the emergence of impulses of growth were visible, predicting that manufacturing capacity was likely to recover from the third quarter of the current fiscal year.
“For the year 2020-21, as a whole, the real GDP is expected to decline by 9.5 percent, with risks tilted to the downside. If, however, the current momentum of upturn gains ground, a faster and stronger rebound is eminently feasible,” he said.
However, he sounded cautious about private investment and exports, which he forecast were are likely to be dim because external demand is still “anemic.”
On the much-anticipated subject of the “shape of the recovery, Das said the Indian economy recuperation was “likely to predominantly be a three-speed recovery, with individual sectors showing varying paces, depending on sector-specific realities.”|
He said the sectors that would open the earliest were expected to be those that have shown resilience in the face of the pandemic and are also labor-intensive.
He listed agriculture and allied activities, transport, and pharmaceuticals in this category that “have already opened up new vistas for fresh investment to step in.”
“Agriculture and allied activities could well lead the revival by boosting rural demand.”
Das noted that the second category of sectors to “strike form” would be activities normalizing gradually and the third category are those that face the “slog overs.”
“They can rescue the innings. These are sectors that are most severely affected by social distancing and are contact-intensive.” EFE-EPA