GDP forecast retained at 10.5%

Mumbai: The Reserve Bank of India on Wednesday retained the economic growth projection for the current financial year at 10.5 per cent, while cautioning that the recent surge in Covid-19 infections has created uncertainty over the economic growth recovery. In its last policy review, the RBI had projected a GDP growth rate of 10.5 per cent for FY'22. Taking various factors into consideration, it said, "the projection of real GDP growth for 2021-22 is retained at 10.5 per cent consisting of 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."

The RBI said that though the firms engaged in manufacturing, services and infrastructure sectors were optimistic about a pick-up in demand, "consumer confidence, on the other hand, has dipped with the recent surge in Covid infections in some states imparting uncertainty to the outlook."

RBI Governor Shaktikanta Das that the increase in international commodity prices since the February monetary policy and recurrence of global financial market volatility like the bout experienced in late February accentuates the downside risks.

Das however stated: "Growth is of paramount importance now and RBI will do whatever it takes to sustain the fledgling recovery by ensuring ample and assured liquidity and cheaper funds to oil the wheels of the economy". He noted that global growth is gradually recovering from the slowdown, but it remains uneven across countries and is supported by ongoing vaccination drives, sustained accommodative monetary policies and further sizable fiscal stimulus. The upside risks, however, come from the vaccination programme being speeded up and increasingly extended to the wider segments of the population; the gradual release of pent-up demand; and the investment-enhancing and growth-supportive reform measures taken by the government, he said. "In India, we are now better prepared to meet the challenges posed by this resurgence in infections. Fiscal and monetary authorities stand ready to act in a coordinated manner to limit its spillovers to the economy at large and contain its fallout on the ongoing recovery," he said. He further noted that "in the domestic economy, the focus must now be on containing the spread of the virus as well as on economic revival - consolidating the gains achieved so far and sustaining the impulses of growth in the new financial year (2021-22)". Das stressed that the focus of the Union Budget 2021-22, on investment-led measures with increased allocations for capital expenditure, the expanded production-linked incentives (PLI) scheme, and rising capacity utilisation will reinforce the process of economic revival.