'Covid-19 hangs over future like spectre': RBI in Monetary Policy Report
The macroeconomic risks held forth by the Covid-19 outbreak would
be severe for India, the Reserve Bank of
India (RBI) said in its monetary policy report, released on
Thursday morning.
The
impact of the pandemic came at a time when the economy was just at the turn of
a recovery, “but Covid-19 now “hangs over the future, like a spectre,” it said.
“While efforts are being mounted on a war footing to arrest its spread,
Covid-19 would impact economic activity in India directly through domestic
lockdown.”
The second-round effects would operate through a severe slowdown in global trade and growth. “More immediately, spillovers are being transmitted through finance and confidence channels to domestic financial markets.”
These would inevitably accentuate the growth slowdown, which started in the first quarter of the 2018-19 financial year and continued through the second half of 2019-20.
The second-round effects would operate through a severe slowdown in global trade and growth. “More immediately, spillovers are being transmitted through finance and confidence channels to domestic financial markets.”
These would inevitably accentuate the growth slowdown, which started in the first quarter of the 2018-19 financial year and continued through the second half of 2019-20.
The
outlook for 2020-21 growth was looking up before the Covid-19 scare. There was
a bumper rabi harvest, and higher food prices during 2019-20 provided conducive
conditions for the strengthening of rural demand. The transmission of policy
rate cuts was also improving, with favourable implications for both consumption
and investment demand. Reductions in the goods and services tax (GST) rates,
corporation tax rate cuts in September 2019, and measures to boost rural and
infrastructure spending were to have a positive impact at boosting domestic
demand. But “the Covid-19 pandemic has drastically altered this outlook”, the
monetary policy report said.
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