NEW DELHI: Indian economy's hopes of a double-digit growth in 2021-22 are slowly withering away. This after Reserve Bank of India (RBI) governor Shaktikanta Das in his policy statement projected the real GDP growth at 9.5% for the current financial year, revising downward the central bank's earlier estimate of 10.5%.
According to Friday's statement, the GDP is expected to grow at 18.5% in Q1, much lower than the earlier estimate of 26%; 7.9% in Q2; 7.2 per cent in Q3; and 6.6 per cent in Q4 of 2021-22.
"The sudden rise in COVID-19 infections and fatalities has impaired the nascent recovery that was underway," said the governor, even as he expressed concern at the increased spread of COVID-19 infections in rural areas, which he observed poses downside risks.
Initially, the view was that India would grow at up to 15% in 2021-22 and 10% in the next financial year. However, all those hopes are now dashed.
Many economists had warned that any growth rate below 10% would be devastating for the economy. Then again, given the second wave and the resultant restrictions in economic activities, the RBI's double-digit growth projections had started to look impossible.
Sacchidananda Shukla, chief economist at Mahindra Group, agreed that RBI's earlier double-digit growth forecast was untenable in view of the second wave and so a correction was in order.
Another economist with a corporate house told The New Indian Express that a lower than double-digit growth is very negative. "The 5-yr CAGR (Compound Annual Growth Rate) is now going to take a deep cut and the gap between advanced economies and India will rise further. India's aspiration to become a developed economy just got extended by an unknown number of years," he says.
Aditi Nayar, chief economist, ICRA, said that while the MPC's rANeal GDP growth projection of 9.5% is in line with the end of their forecast range of 8-9.5%, they believe that accelerated vaccine availability, resulting in a back-ended surge in domestic demand, is central to this outcome.
Economists though welcomed the RBI's liquidity measures, which they saw as favourable for the economy.
"The more important thing is that apart from G-SAP enhancement, RBI has continued to do more than its fair share in terms of heavy lifting. It has now reached out with liquidity to even the contact services segments etc. All of which hints at not a very big fiscal intervention going forward," said Shukla.
Apart from other measures, the RBI has announced a separate liquidity window of Rs 15,000 crore till March 31, 2022 with tenors of up to three years at the repo rate.