Global Echo Expected to Fall into Recession: RBI

Mumbai: the Reserve Bank of India The monetary policy report released Thursday shows that while inflation is expected to be lower than expected, the pandemic has dramatically altered the growth outlook, which it has not attempted to forecast. However, the central bank takes into account the rupee at an exchange rate of 75 per dollar and the average prices of crude oil at $ 35 for fiscal year 21.

The global economy It is expected to fall into recession in 2020, as post-Covid-19 projections indicate. The sharp reduction in international crude oil prices, if maintained, could improve the country's terms of trade, but the gain from this channel is not expected to offset the drag from the closure and the loss of external demand, he said in his report. .

“India has not been spared the exponential spread of and as of April 7, more than 4,700 cases have been reported. Covid-19 would impact economic activity in India directly through the internal blockade. Second-round effects would operate through a severe slowdown in world trade and growth. More immediately, indirect effects are transmitted through financial and trust channels to national financial markets, ”the report said.

According to the RBI, under these conditions, the forecasts are dangerous, since they are subject to major revisions with each incoming data on the pandemic. Projected inflation for the first quarter of the financial year beginning April 1 fell to 4.8% and is seen to drop to 4.4% in the quarter ending September from a range of 5-5.4% for the six-month forecast. previous, according to the central. bank's monetary policy report.

Price gains are expected to slow further to 2.7% in the quarter ended December, near the lower end of the RBI's 2-6% target band. Forecasters, in the survey conducted before RBI's monetary policy announcement on March 27, expected real GDP growth to rebound from 4.6% in 4Q20 to 6.1% in 4Q21. However, after the blockade and the exponential increase in cases worldwide, many have substantially reduced the forecasts.

Highlighting the variables in the economy , the RBI said that apart from the continuing resilience of agriculture and allied activities, other sectors of the economy will be adversely impacted by the pandemic, depending upon its intensity, spread and duration. “Relatively modest upsides are expected to emanate from monetary, fiscal and other policy measures and the early containment of Covid-19 if that occurs. Such uncertainties make the forecasting of inflation and growth highly challenging,” the RBI said.