MUMBAI: Reserve Bank Governor Shaktikanta Das on Friday said the economy is recuperating faster than anticipated and growth rate is likely to turn positive in the second half of the current financial year.
In the year as whole, the economy is likely to contract by 7.5 per cent, which is an improvement over Reserve Bank's previous projection of 9.5 per cent contraction, the Governor said while unveiling the bi-monthly monetary policy review.
The economy contracted by 23.9 per cent in the first quarter and 7.5 per cent in the second quarter on account of the COVID-19 pandemic.
Observing that the prospects of growth have brightened with the progress on the vaccine front, Das said, the economy was likely to record a growth of 0.1 per cent in Q3 and 0.7 per cent in Q4.
"Data that have become available for Q3:2020-21 confirm that the economy is recuperating faster than anticipated and more sectors are joining the multi-speed upturn that I had highlighted in my statement in October," Das added.
As per RBI, real GDP growth is projected at (-) 7.5 per cent in 2020-21, (+) 0.1 per cent in Q3 2020-21, and (+) 0.7 per cent in Q4 2020-21; and 21.9 per cent to 6.5 per cent in H1 2021-22, with risks broadly balanced.
In its October monetary policy statement, RBI had said the real GDP growth in 2020-21 is expected to be negative at (-) 9.5 per cent, with risks tilted to the downside: (-) 9.8 per cent in Q2:2020-21; (-) 5.6 per cent in Q3; and 0.5 per cent in Q4.
The RBI Governor further said the growth impulses that have emerged augur well for the revitalisation of the Indian economy.
Policy stimuli by the government and the RBI are intended to nurture these growth sprouts to greater strength.
Efforts are underway to ensure a calibrated unlocking of the economy, with cognizance and caution about the virus, he said.
"While we remain vigilant, we must now turn to alleviating the scars left by the pandemic and revive the economy.
The horizon has lighted up with the spate of positive news on the vaccines, and a steady rise in recoveries.
India's time has come to break free of the fetters of COVID-19 and reconfigure our destiny," Das added.
The six-member MPC, headed by Das, voted unanimously to leave the policy repo rate unchanged at 4 per cent.
It also decided to continue with the accommodative stance of monetary policy as long as necessary at least through the current financial year and into the next year to revive growth on a durable basis and mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward.
Das also noted that the recovery in rural demand is expected to strengthen further, while urban demand is also gaining momentum.
Consumers remain optimistic about the outlook and business sentiment of manufacturing firms is gradually improving.
He said the fiscal stimulus is increasingly moving beyond being supportive of consumption and liquidity to supporting growth-generating investment.
However, private investment is still slack and capacity utilisation has not fully recovered.
While exports are on an uneven recovery, the prospects have brightened with the progress on the vaccines.