Despite the Reserve Bank of India's (RBI) numerous actions to spur the economy, India's gross domestic product (GDP) is likely to contract by 4.5 percent in the April-June 2020 quarter and is expected to rise only by 2 percent in 2020-21 sue to the coronavirus impact, according to domestic rating agency Icra.
The RBI refrained from giving its estimate on both growth and inflation, saying things are fluid and rapidly changing, while announcing several measures in the policy review.
The Indian economy was already experiencing a low growth of 5 percent in 2019-20, according to official estimates, and the coronavirus-related worries have compounded the problems. India has been placed under a 21-day lockdown till mid-April, which has chilled virtually all the economic activity.
While RBI's policy measures got welcomed as a set of "comprehensive announcements" by Icra, it said in a note, "Regardless of the measures announced now by the RBI, we are lowering our base case scenario for GDP growth to (-)4.5 percent for Q1 FY2021 and to 2 percent for FY21. The estimate is guided by the rapidly growing uncertainties over the duration of the impact of coronavirus on economic activity in India and the rest of the world.The combination of moratoriums, liquidity enhancing measures, and the sharper-than-hoped-for repo rate cut will help to assuage the markets in these increasingly unsettled times, and offer some protection against widespread defaults, even though the actual impact on boosting economic activity may be limited."
A slew of analysts have been downwardly revising their growth estimates following the outbreak of the coronavirus pandemic in India and also a host of developed countries.
RBI has put on hold EMI payments on all term loans for three months and cut interest rate by the steepest in more than 11 years as it joined government efforts to rescue a slowing economy that has now got caught in coronavirus whirlwind.