GDP growth in 2020-21 likely to be in negative, says RBI Governor Shaktikanta Das

Confirming the worst fears of the economy, the Reserve Bank of India (RBI) has said that the GDP growth of the country is likely to be negative for 2020-21.

"The GDP growth in 2020-21 is expected to remain in the negative category with some pick up in the second half," RBI Governor Shaktikanta Das said during the presser.

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Negative growth means an annual contraction in the economy, a phenomenon that India last saw in 1980.

DH, in its poll of economists, earlier this week, has said that GDP might see the first annual contraction in four decades.

Economic activity other than agriculture is likely to remain depressed in Q1:2020-21 in view of the extended lockdown, RBI said in a monetary policy statement.

Also read — DH Poll: GDP may contract by 21% in Q1, 1.3% in FY21

"Even though the lockdown may be lifted by end-May with some restrictions, economic activity even in Q2 may remain subdued due to social distancing measures and the temporary shortage of labour," it added.

The news of contraction send equity markets into sell-off mode, the analysts on Dalal Street said.

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Recovery in economic activity is expected to begin in Q3 and gain momentum in Q4 as supply lines are gradually restored to normalcy and demand gradually revives, according to the Reserve Bank of India.

"For the year as a whole, there is still heightened uncertainty about the duration of the pandemic and how long social distancing measures are likely to remain in place and consequently, downside risks to domestic growth remain significant. On the other hand, upside impulses could be unleashed if the pandemic is contained, and social distancing measures are phased out faster," RBI said.