First full-year contraction in 4 decades all set to be reality for India
Published On: Friday, May 22, 2020 | By: Team KnowMyStock
RBI governor Shaktikanta Das today said that GDP growth would likely remain in the negative territory in 2020-21 lending credence to the dire forecasts rating agencies and brokerages. Das said he was optimistic about a possible pick-up in growth impulses in the second half, but added that everything was going to depend on how the pandemic situation plays out. In the second half, Das said, the economy could get a boost from ideal conditions created by fiscal, monetary, and administrative actions taken so far — possibly leading to a change in the situation.
Today's surprise 40 bps benchmark rate cut was the latest in a recent series of monetary actions aimed at lending support to shrinking GDP.
Brokerages were already pretty certain of a coming full-year contraction in growth because the devastation that the lockdown has caused is without parallel. People in massive numbers have been left hanging by a thread — livelihoods gone, money running out, haphazard implementation of government's life-saving measures not helping much.
Following Modi's mega stimulus announcement and FM's five-day decoder, it took ratings agencies and brokerages just a few days to connect the dots and decipher that FY21 could be the first year in 40 of a full-fiscal GDP contraction.
Brokerages and i-banks lately effected major cuts in their India projections largely because of (i) lockdown extension (ii) unlikely short-term impact of reforms (iii) the coming labour shortage (iv) broken supply chains (v) crippled key business centres.
Tags: GDP contraction RBI Governor
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