The weakening of consumption demand, declining capacity utilisation are restraining new investments the Reserve Bank of India (RBI) said on Tuesday, 25 August.
In its annual report, the RBI stated that India’s growth for the year 2020-21 is projected at minus (-) 4.5 percent.
The negative overall growth of the economy can be attributed to the slowdown due to COVID-19 where many sectors including, real estate, textile, automobile among others have been under the pump due to low sales and operations temporarily forced to cease.
“In its latest update (June 2020), the IMF has projected global growth at (-) 4.9 percent for 2020, with a steeply negative impact on economic activity in H1 and more gradual recovery than expected earlier. India’s growth is projected at (-) 4.5 percent for 2020-21. The projections set out by the OECD on 10 June 2020 present two scenarios – single hit and double hit – the latter being one in which a second wave of rapid contagion erupts later in 2020,” the RBI report said.
In terms of global economic prospects, the World Bank has projected the deepest global recession in eight decades in 2020. That’s almost three times as steep as the global recession of 2009.
It is also expected that inflation will remain high in Q2 20-21 but it’s likely to come down in the second half of 2021.
The report also said that the impact due to loss of capital and labour in the 68 days of lockdown in the manufacturing and mining sectors can be estimated to be as high as Rs 2.7 lakh crore.
In some key areas like hospitality, travel, airlines, tourism, among others, job loss has affected more people than any other sector.
The RBI has asked for a range of reforms to regain the losses due to the pandemic and also said it will take time for things to regain momentum.
It has also called upon leveraging Information and Communication Technology for economic progress and said it has to be a key element “of the future development strategy by reducing transaction and communication costs and by improving the quality of capital.”
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