India is testing GDP as negative: RBI governor had announced a 40 bps cut in repo and reverse repo rates, while pivoting the regulator’s focus from inflation control to fostering growth.
The Reserve Bank of India (RBI) had announced an emergency rate cut for the second time in as many months on Friday as the coronavirus pandemic poses a grave threat to the country and will lead to the first economic contraction in the past 40 years.
RBI Nudges The Economy Further
“It is in the growth outlook that the marginal propensity to consume judged the risks to be gravest. The combined impact of demand compression and supply disruption will depress economic activity in the first half of the year,” governor Das said in a statement.
In the month of March, the RBI had allowed a three-month moratorium on payment of all term loans due between March 1 and May 31.
Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, were deferred by three months.
As a result of this moratorium, individuals EMIs of loans taken were not deducted from their bank accounts, providing much-needed liquidity.
On the outlook, RBI said the inflation outlook is highly uncertain. “Given the current global demand-supply balance, international crude oil prices are likely to remain lesser although they may firm up from the recent depressed levels,” the apex bank said. Turning to the growth outlook, RBI added that economic activity except agriculture is likely to remain depressed in Q1 of 2020-21 in view of the extended lock down.Revival Of The Economy and GDP
“Recovery in economic activity is expected to begin in Quarter 3 of this FY and gain momentum in Q4 of this FY as supply lines are gradually restored to normalcy and demand gradually revives,” RBI governor pointed out.
The press briefing comes after the government gave details of the Rs 20 lakh crore stimulus package.
The Relief Package of 20 Lack Crore made the banks lend more to the people.