The Reserve Bank of India (RBI) said on Friday that India’s gross domestic product (GDP) growth would be in negative territory in 2020-21 as the outbreak of coronaviruses disrupted economic activity. RBI Governor Shaktikanta Das said that the global economy is heading towards a recession. He also said that the inflation outlook is “highly uncertain”. “Domestic economic activity has been severely affected by the two-month lockdown,” he said, adding that the top six industrial states say 60 percent of India’s industrial production is in the red and orange regions.
He said that high frequency indicators indicate a drop in demand, and a fall in demand for electricity and petroleum production. The governor said that the biggest setback was 60 percent domestic demand in private consumption. Das said that the combined effect of demand compression and supply disruption will affect economic activity in the first half of the current financial year. “Assuming that economic activity restores in a phased manner in the second half of this year, and taking into account the favorable base effect, it is expected that fiscal, currently undertaken jointly by both the government and the RBI, Monetary and administrative measures create conditions for gradual revival. Activities in the second half of 2020-21.
He said, “GDP growth is projected to be in negative territory in 2020-21; there will be some increase in growth impulses in the second half of 2020-21.” Regarding inflation, Das said that headline inflation may remain stable in the first half of the current financial year, and will ease in the later part of the year.