As the Indian economy emerges out of the debilitating impact of pandemic, the GDP is now expected to register positive growth of 0.1 percent in October-December 2020 (Q3), and rise marginally to 0.7 per cent in January-March 2021 (Q4), according to an RBI study on the ‘State of the Economy’.
An update of the economic activity index (EAI) in RBI’s assessment further shows that in the first half of 2021-22, the economy will clock a growth rate of 14.2 per cent on top of the 0.4 per cent growth rate in the second half of 2020-21.
“Over the month gone by, more evidence has been turned in to show that the Indian economy is breaking out amidst winter’s lengthening shadows towards a place in the sunlight,” the study said. The economy dipped by a record 23.9 per cent in the June quarter but the contraction narrowed down to 7.5 per cent in the September quarter.
The National Statistical Office’s (NSO) end-November release delivered a pleasant surprise – the pandemic-imposed retrenchment of Q1 of 2020-21 turned out to be much shallower in Q2 and the economy is reflating at a pace that beats most predictions, it said.
Two factors are blessing this turning of the page: one, a bending of the Covid infection curve, and second, a ‘method’ to the stimulus which started with liquidity/ guarantee and cash/ kind support to the economy, which is now transiting in a calibrated fashion to support investment and consumption demand.
The RBI paper said the fourth bi-monthly resolution of the monetary policy committee (MPC) did maintain status quo on the policy rate and stance, but a powerful message was conveyed: growth projections were revised upwards by 200 basis points from October. If they hold, the Indian economy will clock a growth rate of 14.2 per cent in the first half of 2021-22 on top of 0.4 per cent in the second half of 2020-21, the study said.
