RBI Projects India’s Growth at 7.4% in 2020-21, Cuts Reverse Repo Rate to 3.75%

RBI Governor Shaktikanta Das on Friday forecasted India’s growth rate at 7.4 per cent in 2020-21, saying that the country is expected to post a sharp turnaround and resume its pre-covid, pre-slowdown trajectory.

Quoting the projections by IMF amid the COVID-19 crisis, Das said: “For 2020-21, International Monetary Fund projects sizable reshaped recoveries, close to 9 percentage points for the global GDP. India is expected to post a sharp turnaround and resume its pre-covid, pre-slowdown trajectory by growing at 7.4% in 2020-21.”

“On April 14, International Monetary Fund (IMF) released its global growth projections revealing that in 2020, the global economy is expected to plunge into the worst recession since ‘The Great Depression’,” he said.

Again quoting IMF growth projections, Das said that the global economy is expected to plunge into the worst recession since ‘The Great Depression’.

The RBI also cut the reverse report rate by 25 basis points to 3.75 per cent while keeping the repo rate unchanged.

In a bid to to improve liquidity of SMEs, Das announced that the RBI has allocated Rs 50,000 crore to financial institutions such as Nabard, Sidbi and NHB.

He also announced that banks will not be making any further dividend payout in view of financial difficulties arising from COVID-19.

Furthermore, the 90-day NPA norm will not be implemented on moratorium granted on existing loans by banks, Das annouced. Last month, the central bank had asked all lending institutions to allow a three-month moratorium on EMI payments in order to infuse liquidity into the system as the economy grapples with coronavirus challenges.

Das said the inflation is on a declining trajectory and could fall below the central bank’s 4 per cent target by the second half of this fiscal amid challenges posed by Covid-19 pandemic. He said the consumer price index based retail inflation has fallen by 170 bps from its January 2020 peak.

Das added that such an outlook would make policy space available to address the intensification of risks to growth and financial stability brought about by Covid-19. The retail inflation for March fell to a four-month low of 5.91 per cent on cheaper food articles.

Stating that the RBI is monitoring situation developing out of Covid-19 outbreak, he noted that the contraction in exports in March at 34.6 per cent much more severe than global financial crisis of 2008-09.

Das began his address by quoting Mahatma Gandhi, saying: ‘In the midst of death life persists, in the midst of untruth, truth persists, in the midst of darkness light persists.’

On March 27, RBI held a historic pre-term MPC (Monetary Policy Committee) meeting whererin the repo rate was cut by a record 75 basis points. The repo rate was reduced to a 15-year-low of 4.40 per cent and was also the steepest cut since October 2004.

The same day, the central bank cut the cash reserve ratio by 100 bps to 3 per cent apart from announcing various measures to boost liquidity in the system.

There were calls that the 75 bps cuts was not sufficient and that RBI could go for more rate cuts and liquidity measures. Many brokerages had said RBI could slash the lending rates by another 100 bps.

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Source: Jagaran

Image Courtesy: WEplayCoins

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