Mumbai, Oct 9 (IANS): As the economy somewhat stabilises after a 23.9 percent plunge in the GDP in the April-June quarter marred by the nationwide lockdown, Reserve Bank of India Governor Shaktikanta Das on Friday said that the deep contractions of Q1 are behind us and the real GDP may decline by 9.5 percent in the financial year 2020-21.
Addressing the media after the Monetary Policy Committee's meeting, the RBI Governor has said that the modest recovery in various high-frequency indicators in September 2020 could strengthen further in the second half of 2020-21 with progressive unlocking of economic activity.
"Agriculture and allied activities could well lead the revival by boosting rural demand," he added.
Das said that relative to pre-COVID levels, several high-frequency indicators are pointing to the easing of contractions in various sectors of the economy and the emergence of impulses of growth.
"By all indications, the deep contractions of Q1:2020-21 are behind us, silver linings are visible in the flattening of the active caseload curve across the country. Barring the incidence of a second wave, India stands poised to shrug off the deathly grip of the virus and renew its tryst with its pre-COVID growth trajectory."
Citing RBI's surveys, he also said that manufacturing firms expect capacity utilisation to recover in the third quarter of the current fiscal and activity to gain some traction from Q3 onwards.
However, both private investment and exports are likely to be subdued, especially as external demand is still "anaemic".
"For the year 2020-21 as a whole, therefore, real GDP is expected to decline by 9.5 percent, with risks tilted to the downside. If, however, the current momentum of upturn gains ground, a faster and stronger rebound is eminently feasible," he said.
On the much talked about subject of the "shape of recovery" for the economy, he said that the country is likely to predominantly see be a "three speed" recovery, with individual sectors showing varying paces, depending on sector-specific realities.
Sectors that would "open their accounts" the earliest are expected to be those that have shown resilience in the face of the pandemic and are also labour-intensive. Agriculture and allied activities, fast-moving consumer goods, two-wheelers, passenger vehicles and tractors, drugs and pharmaceuticals, and electricity generation, especially renewables, are some of the sectors in this category.
"In several of these areas, reforms such as in agricultural marketing and value chains encompassing cold storage, transport and processing; changes in labour laws; and creation of capacity for production and distribution of vaccines have already opened up new vistas for fresh investment to step in," Das said.