"COVID-19 Hangs Over Future Like A Spectre": RBI Amid Lockdown

Coronavirus Impact: The Reserve Bank of India (RBI) said that it is assessing the "the intensity, spread and duration of COVID-19".

'COVID-19 Hangs Over Future Like A Spectre': RBI Amid Lockdown

Coronavirus: The countryhas reported over 5,000 active COVID-19 cases


  • COVID-19 has sharply altered India's economic recovery, says RBI
  • RBI says lockdowns to directly impact economic activity
  • On Thursday, India entered sixteenth day of 21-day lockdown
The Reserve Bank of India (RBI) said on Thursday the coronavirus pandemic "hangs over the future, like a spectre", and the lockdowns will impact the country's economic activity directly. The global macroeconomic outlook is overcast with the COVID-19 pandemic "with massive dislocations in global production, supply chains, trade and tourism", the central bank said in its Monetary Policy Report. The RBI report was released as India entered the sixteenth day of a 21-day nationwide lockdown to curb the spread of the COVID-19 disease, stalling business in an already-slowing economy.

Here are 10 things to know:

  1. The RBI said the coronavirus outbreak has sharply altered the country's economic recovery. "Prior to the outbreak of COVID-19, the outlook for growth for 2020-21 was looking up... The COVID-19 pandemic has drastically altered this outlook," the RBI said. 

  2. Describing the present environment as "highly fluid", the central bank said that it is assessing the "the intensity, spread and duration of COVID-19". "COVID-19, the accompanying lockdowns and the expected contraction in global output in 2020 weigh heavily on the growth outlook," the RBI said. (Also Read: RBI Says Coronavirus Has "Drastically Altered" Growth Outlook)

  3. The RBI projected real growth in GDP or gross domestic product at 5.0 per cent for fiscal year 2019-20, which ended on March 31, 2020, and 5.5 per cent in current fiscal year which ends on March 31, 2021. Official data on the final quarter of 2019-20 will be released in May-end.

  4. The central bank projected consumer inflation - or the rate of increase in consumer prices - at 6.7 per cent in the fourth quarter of 2019-20, and 3.2 per cent in January-March 2021. The RBI - which monitors consumer inflation while formulating its monetary policy - said it will ensure that inflation remains within the target going forward.

  5. Asserting that the coronavirus outbreak will impose an "ambiguous" impact on inflation, the RBI said "a possible decline in food prices likely to be offset by potential cost-push increases in prices of non-food items due to supply disruptions". Many economists have warned of supply disruptions around the world if lockdowns trigger panic buying.

  6. The central bank hinted at continuing with its "accommodative" policy stance for the time being. Going forward, the RBI said, liquidity conditions will be managed under the revised framework consistent with accommodative stance of monetary policy "as long as necessary" to revive growth and mitigate the impact of COVID-19. In an emergency move late last month, the RBI had cut its key lending rate by a bigger-than-expected 75 basis points, and announced several measures to inject rupee and dollar liquidity in the domestic markets.

  7. The RBI projected the repo rate - the key interest rate at which it lends short-term funds to commercial banks - at 4.65 per cent at the end of fiscal year 2020-21. It reiterated that conditions remained highly uncertain and said it is refraining from providing any projections on GDP growth.

  8. The centralbank also warned of the world economy entering a recession in calendar year 2020, citing "post-COVID projections". "Financial markets across the world are experiencing extreme volatility; global commodity prices, especially of crude oil, have declined sharply."

  9. Significant measures taken by the RBI and the government will mitigate the adverse impact on domestic demand and help spur economic activity once normalcy is restored. "Risks around the inflation projections appear balanced at this juncture and the tentative outlook is benign relative to recent history. But COVID-19 hangs over the future, like a spectre," the RBI said. 

  10. The economy grew at the worst pace recorded in more than six years in the last three months of 2019, and official estimates indicate a growth rate of 5 per cent for 2019-20 - the slowest pace of expansion since the 2008-09 global financial crisis. The country has reported over 5,000 active coronavirus cases and 166 deaths as of Thursday morning.

Median Projections Of Professional Forecasters2019-202020-21
Inflation, Q4 (year-on-year)6.7%3.2%
Real GDP growth5%5.5%
Gross domestic saving (per cent of GNDI)29.4%29.5%
Gross capital formation (per cent of GDP)30%30%
Credit growth of scheduled commercial banks7.2%9.3%
Combined gross fiscal deficit (per cent of GDP)6.8%6.5%
Central government gross fiscal deficit (per cent of GDP)3.8%3.6%
Repo rate (end-period)5.15%4.65%
Yield on 91-days treasury bills (end-period)4.9%4.7%
Yield on 10-year central government securities (end-period)6.2%6.1%
Overall balance of payments (US$ billion)49.840
Merchandise exports growth-2.9%-0.6%
Merchandise imports growth-7.2%-2.9%
Current account balance (per cent of GDP)-1%-0.7%
Note: GNDI: Gross National Disposable Income
Source: Survey of Professional Forecasters (March 2020 round, conducted during March 6-19, 2020)