The Reserve Bank of India in its February meeting of the Monetary Policy Committee had estimated a GDP growth rate of 6 percent for the year 2020-21. However, the international rating agency Fitch has estimated India's GDP growth rate to be 0.8 percent for the year 2020-21 due to the Corona epidemic.
Corona Update
~India's GDP growth rate is estimated to be 0.8 percent.
~World GDP is projected to fall to 3.9 percent for 2020.
India entered 2020 with low growth projections on the economic front. This was followed by slowing GDP growth of several quarters. But the corona virus epidemic has added to the situation.
International rating agency Fitch has estimated India's GDP growth to be 0.8 percent for the year 2020-21. Brian Coulton, Chief Economist, Fitch Ratings, says - "World GDP is projected to fall to 3.9 percent for 2020, a recession of unprecedented depth in the post-war period."
Last week, the International Monetary Fund (IMF) announced that India, like the rest of the world, would be affected by the deadly Covid-19. This epidemic has killed 1.8 lakh people worldwide till 23 April. There have been around 700 deaths in India as well. Corona virus infection has kept around 4 billion people in homes worldwide. It has also forced industries to stop production for fear of community dispersal.
GDP growth estimate
Never before, the events of the last two months due to the corona virus brought India's projected GDP growth to 2.5 percent from the 5 percent level in January. Global financial institutions and rating agencies have projected lower economic output for the fiscal year 2020-21.
RBI hopeful
Ever since the corona virus lockdown has been announced, the RBI has been working on its knees to save the economy from its effects. The banking regulator has reduced the repo rate to a 15-year low, that is, by 4.4 per cent. Also, banks have been allowed to hold EMI for three months for term loans. Also, the liquidity has been increased by cutting the Cash Reserve Ratio (CRR). All this was done to reduce the effect of lockdown.
The RBI in its February meeting of the Monetary Policy Committee had estimated a GDP growth rate of 6 percent for the year 2020-21. The central bank then said that the corona virus (then it was in its early stages) would affect global business and tourism, but the rabi crop is expected to increase private consumption, especially in rural areas.
But after this, the corona virus started spreading its foot rapidly in India. By the afternoon of 23 April, around 22,000 cases had been reported in India and 700 deaths had taken place. On 9 April, the RBI issued a half-yearly monetary policy. Accordingly, India's GDP growth rate is estimated to be 5.5 percent for the year 2020-21. The report also said that a three-month lockdown would hurt the economy deeply.
The RBI Monetary Policy Report states - "If the shutdown continues for three months and there are no offsetting factors, then the annual GDP growth rate could have been between 4-6 per cent less than what it should have been."
IMF and World Bank
The IMF and World Bank had estimated GDP growth rates of 5.8 per cent and 5 per cent respectively for the Indian economy in FY 2020-21. Even at that time, the IMF argued that lower than expected demand has reduced expectations from India.
However, due to the Corona virus lockdown at this time, the IMF believes that this growth rate can be up to 1.9 percent. RBI Governor Shaktikanta Das calls it a good sign because it is one of the highest rates among the G20 countries.
The World Bank also lowered its expectations from India and considered credit weakness as the reason. The World Bank had predicted India's growth rate to be 5 percent for 2020-21.
On April 12, the World Bank gave a range of GDP growth rates which will depend on how India controls the corona virus. 4 percent growth rate if policy measures remain effective and 1.5 percent growth rate if the shutdown is increased.
Moodies and fitch
In January, Fitch Ratings said that India would recover from GDP growth rate of 5.6 per cent in 2020-21, Fitch Ratings said, but has now reduced this estimate to a 30-year low of 2 per cent in the first week of April.
On Thursday, Fitch Ratings revised its expectations again and predicted a 0.8 percent GDP growth for India in 2020-21.
Similarly, Moody's ratings are also less optimistic. In January, it had projected a growth rate of 5.8 per cent for India's fiscal year 2020-21, which was reduced to 2.5 per cent in late March.
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