The worst is over for India’s economy, unless another wave of coronavirus pandemic hits the country, the Reserve Bank of India said in its monthly bulletin for January, released on Thursday. The central bank reiterated its December projection that growth rate will enter positive territory in the third quarter (October-December) of the current financial year.
“Recent shifts in the macroeconomic landscape have brightened the outlook, with GDP [Gross Domestic Product] in striking distance of attaining positive territory and inflation easing closer to the target,” the RBI said. Growth rate in the third quarter is likely to come at 0.1%, according to the central bank. India’s Gross Domestic Product growth rate contracted by 7.5% in the second quarter (July-September), after shrinking by an unprecedented 23.9% in the first three month period (April-June) of the financial year.
The RBI also took note of the first advanced estimates of the national income released by the government earlier this month, that predicted India’s growth rate for the full year 2020-’21 to contract by 7.7% in real terms. The central bank pointed out that the projection by the National Statistical Office shows that the economy is in a better shape than expected, as the International Monetary Fund had in October predicted that the GDP will contract by 10.3%.
In its bulletin, the RBI said that a “V-shaped recovery” was in offing for India in the next financial year (2021-’22) and expected growth to be mostly-consumption driven.
“The shape of the recovery will be V-shaped after all and the ‘V’ stands for vaccine,” the RBI bulletin said. It added that a successful vaccination programme in the country will tilt the “balance of risks upwards”. RBI also noted a “vigorous resumption” of government spending which acted as an important growth driver when all other components of GDP are in “deep retrenchment” due to the pandemic.