New Delhi: Amid the already dysfunctional economy owing to COVID-19 pandemic, RBI Governor Shaktikanta Das on Friday said the global economy is heading into recession. Confirming the worst fears, he said that India’s GDP growth for fiscal year 2020-21 is likely to remain in the negative, although, some pick up can be expected in the second half.Also Read - No EMI Till August? What About Accumulated Interests? Breaking Down RBI Governor's Latest Announcements
“Domestic economic activity has been impacted severely by the two-month lockdown,” Das said in a televised address. He added that the top-six industrialised states that account for 60 per cent of India’s industrial output are largely in red and orange zones. Also Read - Don't Try to Usurp Powers Amid COVID-19 Crisis: Mamata's 13-page Attack on Governor For 'Abusive' Words
“Assuming that economic activity gets restored in a phased manner in the second half of this year and taking in consideration favourable base effect, it is expected that combined fiscal, monetary and administrative measures currently undertaken by both the government and RBI create conditions for gradual revival of activities in the second half of 2020-21.
“GDP growth in 2020-21 is estimated to remain in the negative territory with some pick up in growth impulses in the second half of 2020-21 onwards,” he said.
He said high-frequency indicators point to collapse in demand, and there is a plunge in demand for electricity and petroleum productions.
The biggest blow is to private consumption that accounts for 60 per cent of domestic demand, the governor said.
Das said the combined impact of demand compression and supply disruption will depress economic activity in the first half of the current fiscal.
On inflation, Das said headline inflation may remain firm in the first half of the current financial year, and ease in the later part of the year.
(With agency inputs)