Second wave of Covid triggers round of growth forecast revisions: RBI annual report: The Tribune India
Bombay, May 27
The Reserve Bank of India said on Thursday that the second wave of the Covid pandemic has triggered a revision of growth projections for the current fiscal year, with the consensus moving closer to its earlier forecast of 10.5%.
The central bank, in its annual report for 2020-2021, said the previous year had left a scar on the economy and “in the midst of the second wave, as 2021-22 begins, widespread desperation is lifted by the cautious optimism that has been built up by vaccination campaigns “.
“The start of the second wave triggered a series of revisions to growth projections, with consensus revolving around the Reserve Bank’s projection of 10.5% for the year 2021-22 – 26.2% in Q1, 8.3 percent in Q2, 5.4 percent in the third quarter and 6.2 percent in the fourth quarter, “he said.
The pandemic, he added, “is the greatest risk to this outlook. Yet the benefits also come from the surge in government investment, increased capacity utilization and recovery in imports of capital goods”.
The RBI said a collective global effort to fight the pandemic would surely yield better results than individual countries fighting alone.
He also said that the conduct of monetary policy in 2021-2022 would be guided by changing macroeconomic conditions, with a bias to remain favorable to growth until it gains ground on a sustainable basis while at the same time. ensuring that inflation stays within target.
According to him, the pace of contagion in the second wave of the Covid pandemic has been alarming, stretching the health infrastructure in terms of the ability to cope with a surge of this size and speed.
The report says the deterioration in key fiscal indicators in 2020-2021 could be attributed to the pandemic superimposed on a cyclical slowdown in tax revenues and a fiscal push against the pandemic through increased public spending.
“Going forward, as growth picks up and the economy gets back on track, it is important that the government adheres to a clear exit strategy and creates fiscal buffers, which can be exploited in the event of future shocks. on growth, ”the RBI said.
For April and early May 2021, the available high-frequency indicators present a mixed picture, he said.
While the mobility and sentiment indicators moderated, several activity indicators held up and showed resilience in the face of the second wave.
The goods and services tax (GST) collections crossed the Rs 1 lakh crore mark for the seventh consecutive month in April and reached the highest level on record, suggesting that manufacturing and services output has been maintained, he said. PTI