Delivering a dire prognosis (forecast) to the country, RBI governor Shaktikanta Das has indicated that GDP growth could be in the negative territory in 2020-21. RBI also signalled that it would do everything possible within the realm of monetary policy to bolster (pillow) the economy. The decision to extend loan moratoriums for another three months will offer considerable relief to all sections.
Lowering repo rates is another welcome measure from RBI but the grim economic indicators spelt out by the governor can also be interpreted as a message to the government to do more from its side, especially in relation to fiscal policy measures. The RBI’s warning of a private consumption slump (flop) even in March points to financially distressed households, which will intensify in coming weeks unless the economy can reopen swiftly.
In contrast to the government which has held out a more optimistic view, Das warned of “encircling gloom” even while flagging the 3.7% rise in agricultural production as a beacon of hope. Finance minister Nirmala Sitharaman has not ruled out further measures on the government’s part. These must not be delayed too long now. The degrowth contagion has spread faster than the coronavirus contagion and needs to be addressed with extraordinary measures. Otherwise the lockdown could become a permanent one for many struggling businesses.