Reserve Bank of India (RBI) Governor Shaktikanta Das said on Friday that the GDP for 2021-22 is seen at 9.5 per cent. This has been arrived at, keeping in mind all positive aspects which have been visible despite the Coronavirus pandemic, like the corporate sector adapting to the situation arising out of it and expectations of normal monsoon, apart from moderation in urban demand.
The break-up of the GDP is to be 18.5 per cent in the first quarter, 7.9 per cent in the second quarter, 7.2 per cent in the third quarter and 6.6 per cent in the fourth quarter of the current fiscal.
Incidentally, the RBI had earlier forecasted 10.5 percent GDP growth for 2021-2022. For the first quarter it had expected 26.2 percent growth, much higher than the now revised figure of 18.5 per cent.
Similarly the central bank has also lowered its forecast for the second quarter at 7.9 compared to its earlier projection of 8.3 percent. It had earlier pegged the third quarter growth at 5.4 per cent and at 6.2 per cent for the fourth quarter, both of which are lower than the projections given on Friday.
Mr Das during his almost half an hour long speech said that the GDP projections were based on certain positive developments despite the raging second wave of the Coronavirus pandemic.
Listing these positive developments, the RBI chief said that people and businesses were adapting to pandemic working conditions. Urban demand, as reflected in some high frequency indicators like electricity consumption, railway freight traffic, port cargo, steel consumption, cement production, e-way bills and and toll collections – recorded sequential moderation during April-May 2021, as manufacturing and services activity weakened due to restrictions imposed by most states.
"Mobility indicators have declined during April-May, but they remain above the levels seen during the first wave last year. Domestic monetary and financial conditions remain highly accommodative and supportive of economic activity. Moreover, the vaccination process is expected to gather steam in the coming months and that should help to normalise economic activity," the RBI Governor noted.
He added that with external demand strengthening, a rebound in global trade is taking hold, which should support India's export sector.
"Global demand conditions are expected to improve further buoyed by fiscal stimulus packages and the fast progress of vaccination in advanced economies. India's exports in March, April and May 2021 have launched into an upswing. Conducive external conditions are forming for a durable recovery beyond pre-pandemic levels," Mr Das said further.
Keeping these factors in mind, the Governor said that the need of the hour is for enhanced and targeted policy support for exports. It is opportune now to give further policy push by focusing on quality and scalability.
"Therefore, notwithstanding the sequential decline of the indicators of rural demand in April, rural demand is expected to remain strong as forecast of a normal monsoon bodes well for sustaining its buoyancy going forward. The increased spread of COVID-19 infections in rural areas, however, poses downside risks. Taking all these factors into consideration, real GDP growth is now projected at 9.5 per cent in 2021-22," he said.