The Reserve Bank of India on Thursday once again projected a 10.5% growth for India’s economy for the 2021-’22 financial year. In its annual report, the central bank said that the second wave of the coronavirus pandemic has triggered “a raft of revisions to growth projections” and the consensus on growth rate was gravitating towards its predictions.
The central bank also said that while the Indian economy was hit by the second wave of the pandemic, it remained resilient on the back of a bumper harvest in the Rabi farming season and momentum of activity in sectors like housing, road construction, freight transportation and information technology.
The RBI, however, added that India’s growth prospects essentially depended on how fast the country can arrest the second wave. “While the economy has not moderated to the extent during the first wave, the surrounding uncertainties can act as a deterrent in the immediate period,” the report noted.
While making the latest announcement on policy rates last month, the RBI had kept its growth projection for this financial year unchanged at 10.5%, despite flagging a risk to global demand due to the second wave. In the report released on Thursday, the RBI projected India’s economy to grow by 26.2% in first quarter (April-June), and by 8.3%, 5.4% and 6.2% the three subsequent quarters, respectively.
As far as fiscal matters are concerned, the RBI annual report noted that the economic cost of spending on Covid-19 related measures taken by the Centre in the previous financial year are expected to spill over till July in an “optimistic scenario”. The report added that the pandemic may induce states into borrowing more than normal and banks must be prepared for higher provisioning.
The report also included the central bank’s balance sheet for the nine-month accounting period that ended March 31. Last year, the RBI changed its accounting year to an April-March schedule, from the earlier period of July-June. The transition meant that the balance sheet included details for the nine-month period of June 2020 to March 2021.
The balance sheet confirmed the central bank’s announcement last month that it will transfer a surplus of Rs 99,122 crore to the central government. The second-highest surplus transfer amount is more than 85% higher than the Budget estimate given by Finance Minister Nirmala Sitharaman in February.
The RBI’s income for the nine-month period fell by 10.96%, while expenditure decreased by 63.10%, the balance sheet showed.