Indian mid-term outlook for 2020 remains unclear with demand and supply chains not fully recovered while the spread of the coronavirus pandemic and the length is still unknown, Shaktikanta Das, Reserve Bank of India Governor said. The forecast of India’s economy shows that the country will mark a record contraction of more than 4.5% in the current fiscal year starting from April 1. India started one of the world’s strictest lockdown by the end of March, lasted for over two months, and starting early June, the restrictions have eased even though the new infections count is still rising. The restriction easing is aimed to help reignite economic activities.
Das said that the economy has shown signs to get back to normal after the restriction is eased, but still uncertain of when the supply chain can be fully restored, and how long demand normalize and what durable effects will leave behind, affecting the potential growth. Looking also from the 2008 crisis, Das said that economic blows have more ‘aftershocks’ than predicted, which makes the country’s financial system should have bigger capital buffers. Indian banks also should undergo a recapitalisation plan as an economic crisis may result in capital erosion for banks and higher bad loans.
Policy rates total reduction has reach 250 basis points since February 2019, including cut by 115 points during the pandemic. The central bank also providing liquidity of 9.57 trillion rupees ($127.28 billion), allowed moratoriums for retail customers also eased bad provisioning norms. The central bank said financial sectors should functions normally without permanent regulatory relaxations, therefore the unusual regulatory and monetary measures to soften the economic blows in the post-pandemic.
India added 27,114 new coronavirus cases on July 13, summed the total to 820,915 including 22,123 dead.
