Onset of second wave triggered raft of revisions to growth projections: RBI
Mumbai, May 27: Reserve Bank of India on Thursday said that the second wave of COVID-19 pandemic has triggered revision of growth projections for the current financial year with consensus gravitating towards its earlier forecast of 10.5 per cent.
The central bank, in its annual report for 2020-2021, further said that previous year has left a scar on the economy and "in the midst of the second wave, as 2021-22 commences, pervasive despair is being lifted by cautious optimism built up by vaccination drives."
"The onset of the second wave has triggered a raft of revisions to growth projections, with the consensus gravitating towards the Reserve Bank''s projection of 10.5 per cent for the year 2021-22 -- 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," it said.
The
pandemic,
it
added,
"is
the
biggest
risk
to
this
outlook.
Yet,
upsides
also
stem
from
the
capex
push
by
the
government,
rising
capacity
utilisation
and
the
turnaround
in
capital
goods
imports."
RBI
further
said
that
a
collective
global
effort
to
fight
the
pandemic
will
surely
bring
better
results
than
individual
countries
fighting
on
their
own.
It also said the conduct of monetary policy in 2021-22 would be guided by evolving macroeconomic conditions, with a bias to remain supportive of growth till it gains traction on a durable basis while ensuring inflation remains within the target.
According to it the pace of contagion in the second wave of COVID-19 pandemic has been alarming, stretching the health infrastructure in terms of the capacity to handle a surge of this size and speed.
The report said the deterioration in major fiscal indicators in 2020-21 may be attributed to the pandemic superimposed on a cyclical slowdown in tax revenues and a counter-pandemic fiscal push through higher government expenditure.
"Going forward, as growth revives and economy gets back on track, it is important for the government to adhere to a clear exit strategy and build fiscal buffers, which can be tapped into in events of future shocks to growth," the RBI said.
For
April
and
early
May
2021,
available
high
frequency
indicators
present
a
mixed
picture,
it
said.
While
mobility
and
sentiment
indicators
have
moderated,
several
activity
indicators
have
held
their
own
and
shown
resilience
in
the
face
of
the
second
wave.
Goods and services tax (GST) collections crossed the Rs 1 lakh crore mark for the seventh consecutive month in April and notched up the highest level on record, suggesting that manufacturing and services production has been maintained, it said.