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Home / Business / Economy / ‘May take years to regain lost GDP, have space for rate cuts’

‘May take years to regain lost

GDP, have space for rate cuts’
According to RBI Deputy Governor Michael Patra, if the projections hold, the
level of GDP would have fallen approximately 6 per cent below its pre-Covid
level by the end of 2020-21 and it may take years to regain this lost output.

By: ENS Economic Bureau | Mumbai | Updated: October 24, 2020 12:43:16 am

The RBI panel last cut the rate by 40 basis points in the May review and kept rates unchanged in the
August policy. (Source: Bloomberg)
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has
indicated that it “may take years” to regain the lost GDP output. On the other LISTEN
hand, NOW
the RBI panel, according to the minutes released on Friday, has signaled that there’s Why Apple is
kidney jokes
“space for future rate cuts” if the inflation evolves in line with expectations.

“There exists space for future rate cuts if the inflation evolves in line with our
expectations. This space needs to be used judiciously to support recovery in
growth,” RBI Governor Shaktikanta Das said. The ongoing transmission of past
monetary policy actions would help ease financial conditions further, Das said in
the minutes released by the RBI.

According to RBI Deputy Governor Michael Patra, if the projections hold, the level
of GDP would have fallen approximately 6 per cent below its pre-Covid level by the
end of 2020-21 and it may take years to regain this lost output. “There is also an
anecdotal sense that the economy’s potential output has fallen, and the post-Covid
growth trajectory will look very different from what has been recorded so far, Patra
said.

EXPAINED

Output recovery key

The outlook for growth and inflation for the next 3-4 quarters suggests the
need for a policy environment enabling recovery of output. The RBI panel last
cut the rate by 40 basis points in the May review and kept rates unchanged in
the August policy.

Das said a number of high frequency indicators of economic activity for the
September quarter of 2020-21 indicated a sequential improvement. The recovery in
all likelihood would be led by rural demand, he said.

Shashanka Bhide, Member of the MPC, said there are clearly uncertainties facing
the growth and inflation projections. “Towards the end of Q2, there are indications
of revival of the economy after the relaxation of restrictions on transportation and
businesses across the country. As supply chains adapt to the new conditions,
recovery is expected to be stronger and sustained,” Bhide said.
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The outlook for growth and inflation for the next 3-4 quarters suggests the need for Why Apple is
a policy environment enabling recovery of output, he said. kidney jokes

Meanwhile, the RBI’s central board on Friday held a meeting to discuss, among
other things, the economic situation and other challenges. The meeting, which was
held through video conferencing, also deliberated on the issues concerning
financial stability in the present context.

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