The Reserve Bank of India on Thursday said that the coronavirus pandemic, lockdown measures and expected contractions in global output for 2020 will “weigh heavily” on the country’s economic growth.

“Covid-19 hangs over the future, like a spectre,” the central bank said in its Monetary Policy Report. “The actual outturn would depend upon the speed with which the outbreak is contained and economic activity returns to normalcy.”

The RBI said that the country’s growth outlook before the coronavirus crisis was “looking up”.
“The Covid-19 pandemic has drastically altered this outlook,” it added. “The global economy is expected to slump into recession in 2020, as post-coronavirus projections indicate.”

The central bank also said that any benefit seen in the terms of trade from a prolonged downturn in the price of international crude is also unlikely to offset the economic drag from the coronavirus-induced lockdown of the country and loss of external demand. “Overall, apart from the continuing resilience of agriculture and allied activities, other sectors of the economy will be adversely impacted by the pandemic, depending upon its intensity, spread and duration,” the RBI added.

The bank further said that the coronavirus outbreak will impose an “ambiguous” impact on inflation. “A possible decline in food prices likely to be offset by potential cost-push increases in prices of non-food items due to supply disruptions,” it added.

The central bank reiterated that the coronavirus conditions remained highly uncertain and said it is refraining from providing any projections on economic growth.

India’s economic growth slipped to a nearly seven-year low of 4.7% in the October-December, according to government data. To combat the crisis triggered by the pandemic, Finance Minister Nirmala Sitharaman had last month announced a Rs 1.70 lakh crore relief package that will provide direct cash transfers and ensure food security for certain sections of the society. The central bank, for its part, had cut interest rates by 75 basis points to 4.4%, in an emergency meeting on March 27 and has taken steps to shore up liquidity, in line with most major central banks around the world.