The RBI said that real GDP growth for 2020-21 was projected as being -7.5%.
“The real GDP growth for 2021 is projected at minus 7.5%. The recovery in rural demand is expected to strengthen further while urban demand is also gaining momentum,” said RBI Governor Shaktikanta Das.
However, core inflation could remain sticky. Project CPI inflation at 5.8% for Q4FY21, and at 5.2%-4.6% for H1FY22 with risks broadly balanced,” says RBI Governor Shaktikanta Das.
RBI governor Shaktikanta Das said the change in the forecast has been prompted by a surge in demand in both rural as well as urban areas.
The second half of the fiscal year is expected to show positive growth despite disruptions caused by coronavirus pandemic, he added.
The RBI kept the policy repo rate at 4 per cent amid persistently high inflation. The consumer price index has been above the tolerance band for seventh straight month in October.
However, Das said that bumper Kharif harvest and dipping vegetable prices are likely to soften inflation.
The economy had shrunk 23.9 per cent during the April to June quarter and 7.5 per cent in the July to September quarter due to steep fall in manufacturing, construction and services.
The central bank has slashed the repo rate by 115 basis points since late March to cushion the shock from the COVID-19 crisis and sweeping lockdowns across the country to check its spread.