FY22 to witness V shaped recovery for India : RBI Governor

The RBI Governor, Mr. Shaktikanta Das expects a V shaped recovery for the nation as projected by the International Monitory Fund (IMF) in FY22.
Das quoted that India is among the Few countries that will cling on to the growth after taking reference of IMF projection of 1.9% growth for the current fiscal.This is the highest among the G20 countries as estimated by the IMF. He also said that the inflation is also expected to decline within the comfort zone of Central Bank and will provide policy space for future actions. According to IMF, India is expected to record a sharp turnaround and continue its Pre Slowdown Pre Covid trajectory by growing at 7.4% in the FY22. 

The RBI announced a list of measures to boost liquidity to financial institution including NBFC. It also reduced the Reverse Repo to 3.75%, i.e. by 25 basis points. "Amidst the encircling gloom, there are a few slivers of brightness" he quoted and cited his March 27 statement on continuing resilience of the agricultural and allied activities on the back of all time highs in the production of horticulture and food grains, with huge buffer stock of wheat and rice far in excess of the buffer norms. He further added that by 10th April, pre monsoon Kharif crop sowing had begun strongly, with paddy - the principal kharif crop - up by 37% when compared to the last season. States such as Telengana, Assam, Odisha, West Bengal, Chattisgarh and Karnataka are leading in sowing activities despite the lockdown.

The healthy growth of 21.3% in tractor sales up to Feb 2020 - as against a contraction of 0.5% in Apr-Feb previous year may provide an offset to farm labor shortages due to lock-down he further added. He noted that the IIP (Index of Industrial Production) for Feb showed that industrial output accelerated to its highest rate in 7 months, and does not capture the impact of Covid-19. Latest reports on exports too has turned out to be more severe than during the 2008 crisis. The govt further said that in the coming period, inflation could reduce even further, barring supply disruption shock and may settle well below the target of 4% by the 2nd half of  FY21.

On 15th April, The IMD (India Meteorological Department) forecast a normal south west monsoon for the coming season, with rainfall expected to be 100% of the long term average. He quoted that these early developments will assist well for rural demand, supported as they are by accelerating fertilize production up to Feb 2020.

In its Feb Bi-Monthly monitory policy, RBI projected the GDP growth of FY21 at 6 %. In next policy released in march, the RBI quoted the implied real GDP growth of 4.7% for 4th quarter of FY 20 in the second advanced estimates of the NSO (National Statistics Office) within the annual estimate of 5% for the year is now at risk from the pandemic's impact on economy as a whole. As regards the outlook for FY 21, RBI has quoted, on March 27, that apart from the continued resilience of agricultural activities, most of the other sector of the economy will be significantly impacted by the pandemic, depending upon its spread, duration and intensity.

If COVID -19 is continued to a longer duration and supply chain disruptions get accentuated, the global crisis deepen, with significant adverse implication for India, it had said, while sharply reducing the pay lending rate by 75 basis points to 4.4%.

Financial markets across the globe remain volatile and emerging economies are grappling with volatile exchange rates and capital outflows. Crude oil prices remain in a state of flux, despite the agreement by OPEC plus countries on production cuts.

Author :
Jay Kumar Hotani