COVID-19 will deepen India's growth slowdown in March quarter: RBI

New Delhi: Ahead of the January-March economic growth numbers due next month, the Reserve Bank of India (RBI) Thursday warned that India’s economy may further hit a multi-quarter low due to the impact of COVID-19.

It, however, stopped short of giving any exact projection in the wake of the coronavirus-related uncertainties impacting the sectors across the economy.

India’s economy had grown a multi-year low of 4.7% in the October-December quarter of 2019-20.

It also cautioned that the likely recession in the global economy caused by a disruption in global supply chains, travel and tourism and lockdowns in many economies, will adversely impact private consumption and demand.

“Private consumption, in particular, is at serious risk from the COVID-19 pandemic, notwithstanding improved rabi prospects and the recent rise in food prices, and the rationalisation of personal income tax rates in the Union Budget 2020-21 along with measures to boost rural and infrastructure spending,” the RBI said in its Monetary Policy Report released today.

With several major economies in lockdown mode, demand conditions may weaken sharply. Accordingly, countries across the world are bracing up for deflationary forces to take hold. India may not be immune to these extreme downside pressures imparted by the pandemic.

With the entire country in lockdown, the NSO would face considerable challenges in compilation and measurement of consumer prices.

The central bank said, the impact of the virus on inflation going forward, will be ambiguous.

“While inflation has peaked and vegetable prices are on the ebb, the impact of COVID-19 on inflation is ambiguous relative to that on growth, with a possible decline in prices of food items being offset by potential cost-push increases in prices of non-food items due to supply disruptions,” the report said.