RBIs annual report: Economic recovery post COVID-19 will be different from that of 2008 global crisis – Moneycontrol.com

The prolonged lockdown in the backdrop of Covid-19 has caused major losses to businesses across segments.



The impact of the pandemic could cause a structural downshift in the potential output of Indian economy, the RBI said on Tuesday in its 2019-20 annual report.

“As in the rest of the world, India’s potential output can undergo a structural downshift as the recovery driven by stimulus and regulatory easing gets unwound in a post-pandemic scenario,” the RBI said.

Moreover, the economic recovery is likely to be different – the GFC (global financial crisis) occurred after years of robust growth with macroeconomic stability; by contrast, COVID-19 has hit the economy after consecutive quarters of slowdown, the RBI said.

Also Read: RBI’s annual report: Moratorium, loan restructuring may impact banks’ health

COVID-19 has impacted the economy hard with growth across all segments contracting. The prolonged lockdown has caused major income losses across segments. Indian economy is projected to contract by as much as 9 per cent in 2020-21.   

Explaining further, the RBI said while the GFC was essentially a financial meltdown whereas the pandemic is a health crisis, which have deleterious ramifications across real and financial sectors.

“So far, policy authorities have responded with an unprecedented defence, involving conventional and unconventional measures in order to mitigate the unconscionable human and economic casualties,” the RBI said.

According to the central bank, the pandemic will inflict deep disfigurations on the world economy. The shape of the future is heavily contingent upon the evolving intensity, spread and duration of COVID-19 and the discovery of the elusive vaccine. Post-COVID-19, the overwhelming sense is that the world will not be the same again and a new normal could emerge.

First Published on Aug 25, 2020 12:42 pm


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