GDP growth in 2020-21 likely to remain in negative: RBI Governor

RBI Press Meet Today LIVE: Repo Rate Reduced by 40 Basis Points, GDP Growth to Remain in Negative Territory, Moratorium Extended For 3 Months Again

RBI has allowed the accrued interest to be converted into a funded interest term loan, which will be fully repaid during the course of the due year ending March 31, 2021.

"Domestic economic activity has been impacted severely by the 2 months lockdown".

MPC is of the view that headline inflation in first half of 2020 will be stay intact but by Q3 and Q4 it may fall below the target of 4 percent, said the RBI governor.

Pointing to the other regulatory measures taken by the Indian central bank, it said the most important development is that the three-month debt moratorium announced in March has been extended until August.

The MPC voted 5-1 for a 40 bps repo rate cut. He also said inflation outlook is "highly uncertain".

This, the Governor attributed to current global demand-supply balance, low worldwide crude oil prices, soft global prices of metals and other industrial raw materials, which are likely to keep input costs low for domestic firms, deficient demand and volatility in financial markets. Demand for fuel has plunged.

The central bank refrained from giving a projection for GDP growth for the current financial year, as it stopped at saying GDP growth expected in the "negative territory" with some pick-up in growth impulses from the second half of 2020-21 onwards. "The total period of applicability will now be six months", RBI governor Shaktikanta Das said, on Friday.

Shaktikanta Das is laying out the economic conditions prevailing in India amid the ongoing coronavirus crisis.

RBI has hiked the group exposure limit for banks to 30 percent from 25 percent.

The state governments maintain a Consolidated Sinking Fund (CSF) with the Reserve Bank as a buffer for repayment of their liabilities.

Food inflation is now under pressure, RBI Governor Shaktikanta Das said that food inflation which had eased from January 2020 peak in February and March has now surged to 8.6 percent in April.

"The repo rate cut by 40 basis points from 4.4 % to 4%. That's why they are going for the rate cut, [while my] guess [is] inflation might be getting into an uncomfortable territory, maybe at the end of the second quarter or so", he said, adding that he is happy the bank is taking steps to address short-term concerns, which the government appears reluctant to handle with fiscal policy. Thus, the rate cuts combined with the further extension of loan moratoriums by 3 months up to August 31, 2020 augurs well for the real estate sector in the times to come. Industries have been demanding extension of the moratorium facility for another three months.



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