Economy likely to grow 10.5% this financial year: RBI

Announcing the monetary policy on Wednesday, the Reserve Bank of India has estimated that the GDP will grow at 26.2 per cent in April-June quarter of 2021-22 over the same period a year ago. The GDP growth projection for 2021-22 is retained at 10.5 per cent.

Mumbai: The Indian economy is likely to grow by a whopping 26.2 per cent in the April-June quarter of 2021-22 over the same period a year ago, says the Reserve Bank of India (RBI).

Announcing the first bi-monthly monetary policy of FY22 on Wednesday, the RBI said: “..real GDP growth is projected to pick up from (-) 8.0 per cent in 2020-21 to 10.5 per cent in 2021-22 – with a quarterly path of 26.2 per cent in Q1, 8.3 per cent in Q2, 5.4 per cent in Q3, and 6.2 per cent in Q4 – with risks evenly balanced.”

According to the Central Bank, Q1 (April-June quarter) will see a better GDP growth on the back of the lower base.

The GDP, which is an indicator of total volume of goods and services produced in the country, de-grew by a never seen 23.9 per cent during the April-June quarter last year followed by 7.5 per cent in July-September quarter pushing the economy into technical recession.

‘Uncertain’ economic recovery

While retaining its earlier GDP growth projection for 2021-22 at 10.5 per cent, RBI enumerated downside risks to the fragile economic recovery.

The uncertainty associated with the spread of COVID-19, including new mutants of the virus, deviation of the south-west monsoon from the baseline assumption of a normal monsoon, and elevated crude oil prices and global financial market volatility pose downside risks to the GDP growth trajectory, noted the RBI statement.

The RBI further said that though the firms engaged in manufacturing, services and infrastructure sectors were optimistic about a pick-up in demand, "consumer confidence, on the other hand, has dipped with the recent surge in COVID infections in some states imparting uncertainty to the outlook."

According to the official estimates, the GDP growth has limped back to the positive territory (0.4 per cent) in the October-December quarter on the back of consumer demand during the Dussehra-Diwali festival season.

However, the economic recovery remains fragile as the Covid-19 resurgence casts shadow on the business activities across the country.

Indicating a second wave, the number of fresh Covid-19 infections has seen an abrupt spike last month.

According to the Union Health Ministry, India has added 1.15 lakh new Covid-19 infections in the last 24 hours alone taking the total case load to over 1.28 crore.

To rein the growing infections, states like Maharashtra, Madhya Pradesh and Gujarat have imposed night curfews and micro-lockdowns.

The National Statistical Office (NSO) in its update on February 26, 2021 placed the contraction in real GDP at 8.0 per cent for 2020-21.

The IMF on Tuesday projected an impressive 12.5 per cent growth rate for India in 2021, stronger than that of China, the only major economy to have a positive growth rate last year during the COVID-19 pandemic.

The Washington-based global financial institution, in its annual World Economic Outlook ahead of the annual Spring meeting with the World Bank, said the Indian economy is expected to grow by 6.9 per cent in 2022.

(With PTI Inputs)