The Reserve Bank, on Friday, lowered the country's growth forecast for the current financial year by a percentage point to 9.5% in view of the uncertainties created by the second wave of the coronavirus pandemic.
Observing that, unlike the first wave, the impact of the second wave of COVID-19 is likely to be relatively contained, RBI Governor Shaktikanta Das said that taking several factors into consideration, "real GDP growth is now projected at 9.5% in 2021-22 consisting of 18.5% in Q1; 7.9% in Q2; 7.2% in Q3; and 6.6% in Q4 of 2021-22."
He was addressing the media after the meeting of the rate-setting panel–Monetary Policy Committee (MPC). The Reserve Bank had earlier projected a growth rate of 10.5% for 2021-22.
Das noted that since the MPC's April meeting, the second wave of COVID-19 has surged across several states and has spread into smaller towns and villages, leaving a trail of human misery and tragedy.
As per the provisional estimates of national income released by the National Statistical Office (NSO) on May 31, 2021, India's real gross domestic product (GDP) contracted at 7.3% for 2020-21, with GDP growth in the January-March quarter at 1.6% (year-on-year).
The Governor said the sudden rise in COVID-19 infections and fatalities has impaired the nascent recovery that was underway but has not snuffed it out. "The impulses of growth are still alive," he said and added that aggregate supply conditions have shown resilience in the face of the second wave.
He further said the RBI will continue to think and act out of the box, planning for the worst and hoping for the best. "The measures announced today, in conjunction with other steps taken so far, are expected to reclaim the growth trajectory from which we have slid," he said.
Looking ahead, a policy package to consolidate India's position as vaccine capital of the world with leadership in the production of pharma products could change the COVID narrative, it was said.
Among other measures, the RBI on Friday announced a Rs 50,000 crore fresh support to All India Financial Institutions, including SIDBI, for new lending in 2021-22, to nurture the still-nascent growth impulses and ensure the continued flow of credit to the economy.
The MPC also decided to keep the policy rate at its current level of 4% and to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.