GDP within striking distance of positive growth: RBI bulletin

Authors of January bulletin forecast quick ‘V’-shaped recovery

RBI Monetary Policy Committee, Jayanth R Varma

The RBI’s January bulletin has made a bullish prediction about the state of the economy in 2021: India’s GDP, which shrank by double-digits last year, is within striking distance of attaining positive growth, it says, forecasting a quick ‘V’-shaped recovery.

The letter ‘V’ in the V-shaped recovery stands for vaccine, the bulletin, which the central bank admits does not necessarily represent its views, says.

“What will 2021 look like? The shape of the recovery will be V-shaped after all and the ‘V’ stands for vaccine,” says the article, whose authors include RBI Deputy Governor Michael Debabrata Patra.

India launched the world’s biggest vaccination drive on January 16 to immunise people from Covid-19.

It has the comparative advantage of having the largest vaccine manufacturing capacity in the world and experience of mass inoculation drives against polio and measles.

The authors identify e-commerce and digital technologies as likely bright spots in India’s recovery, but warn that pre-pandemic levels of output and employment are a long way off.

“Recent shifts in the macroeconomic landscape have brightened the outlook, with GDP in striking distance of attaining positive territory and inflation easing closer to the target,” the bulletin says.

India’s GDP is estimated to contract by a record 7.7 per cent during 2020-21 as the Covid-19 pandemic severely hit the key manufacturing and services segments, as per government projections released earlier this month.

The economy contracted by a massive 23.9 per cent in the first quarter and 7.5 per cent in the second quarter on account of the Covid-19 pandemic.

“It will take years for the economy to mend and heal, but innovative approaches can convert the pandemic into opportunities. Will the Union Budget 2021-22 be the game-changer?” the authors ask.