RBI projects 7.5 percent shrinking of Indian economy

The Reserve Bank of India (RBI) today revised upward its projection of the country's real GDP growth after being hit by coronavirus and lockdown, saying it sees the economy contracting by 7.5 percent from an earlier estimation of a 9.5 percent contraction.

"The real GDP growth for FY21 is projected at -7.5 percent vs -9.5 percent projected earlier, and the second half of the current financial year (April 2020 to March 2021) is expected to show positive GDP growth," RBI Governor Shaktikanta Das told a virtual media briefing.

The Indian economy shrank 23.9% in the first quarter of 2020-21, mainly due to the nationwide lockdowns because of the Covid-19 pandemic, but saw some improvement in the second quarter as the contraction reduced to 7.5%.

Das said the Indian economy is recovering faster, with more sectors joining the recovery path.

However, the retail inflation continued its surging streak for the ninth month in a row to reach 7.61 percent in October, highest since May 2014.

That is why RBI today kept its benchmark lending rate unchanged at four percent and retained status quo for the third time in a row.

"RBI's Monetary Policy Committee (MPC) decided to continue with accommodative stands of monetary policy as long as necessary, at least till current financial year and into next year to revive growth on a durable basis and mitigate the impact of Covid-19 while ensuring that inflation remains within the target," Das said.

The MPC was of the view that the inflation is likely to remain elevated with some relief in winter months from prices of perishables and bumper Kharif arrivals, Das added.