MACROECONOMIC REPORT

May 2020
ECONOMIC DIVISION

1
 ABSTRACT

Global growth has hit unprecedented depths of despair amidst COVID-19 with
substantial risks of even more severe outcomes remaining. IMF’s World Economic
Outlook of April, 2020 projects global output in 2020 to contract by 3 per cent with
output of advanced countries contracting more than emerging market and developing
economies. Aptly called the month of “Global Lockdown”, April, 2020 saw major
indices of manufacturing and services across countries declining to record lows on
the back of supply-side disruptions. Global energy prices plunged, US unemployment
rates surged to double digits, Euro zone consumer confidence and UK retail spending
fell, signalling the onset of a demand crisis as well. This demand shock weighed
heavily on commodity exporter countries as their currencies depreciated relatively
more sharply. Global financial markets dramatically sold-off equity and debt in
March 2020 which led to crashing of benchmark equity indices and tightening of
bond yields before a modest recovery in April 2020. Governments and Central Banks
have responded by announcing stimulus packages and liquidity injections. On 12th
May, 2020, the Prime Minister of India announced a package of Rs. 20 lakh crore for
the country, amounting to 10 per cent of GDP, inclusive of all previous liquidity
support by RBI and fiscal stimulus by the government.

Indian economy had begun to regain momentum with clear signs of uptick in
consumption and investment towards the end of Q3:2019-20, only to be halted by
COVID-19 that made government enforce country-wide lockdown in late March 2020.
Green shoots had appeared with Index of Industrial Production (IIP), Index of Core
Industries (ICI) and merchandize exports rebounding with positive growth in
February 2020 along with signs of revival in consumer sentiment. However, sharp
negative growth of merchandize exports and imports in March 2020 gave first signs
of distress having already entered the country’s economic space. With the imposition
of lockdown from 24th March, FY 2019-20 closed with a seven-day period of
economic inactivity. Besides trade, negative growth in IIP and ICI indices and
particularly the decline in electricity generation in March 2020, reflected the
economic adversity of the lockdown.

As the lockdown continued, manufacturing and services activity came to a standstill

in April 2020 resulting in supply side disruptions and demand falling to
unprecedented lows that fed into PMI indices going into a free fall. A huge decline in
railways freight traffic for April 2020 gave clear evidence that economic inactivity
was indeed widespread both across regions and sectors. Agriculture and allied
activities, however, showed continued resilience on the back of all-time production
highs and huge buffer stocks of rice and wheat. Above normal rains predicted for
2020-21 also boded well for agricultural production. Amid severe COVID-19 induced
supply chain disruptions, harvesting and procurement operations gathered
momentum with an active FCI and supportive railways increasing volumes of
transferred food grains. The overall inflation outlook remains benign with economic
inactivity leading to a broad-based deceleration in price pressures, particularly
energy.

On the external front, the rupee weakened against the dollar with sharp foreign
portfolio investor (FPI) outflows. Yet, rupee outperformed its emerging market peers
displaying a new found resilience in the forex market. Further, rupee depreciation did
not inflate crude oil import bill as its price crashed in global markets. However, gold

2
imports turned costlier with gold price spiking, riding on the yellow metal’s safe
haven appeal.

Fortunately, India's external sector has acquired resilience manifest in improvement

in Balance of Payments (BoP) position despite being challenged by net FPI outflows
for some time. A comfortable BoP rests on manageable current account deficit (CAD),
prudent external debt and robust availability of foreign exchange reserves adequate
to finance more than eleven months of imports. As a considerable drop in domestic
economic activity significantly curtails imports, India’s current account balance may
generate a small surplus in the first quarter of 2020-21. India’s CAD is also
supported by low levels of external debt servicing.

RBI responded to the economic fallout of the lock down by significantly cutting the
repo and the reverse repo to a greater extent to discourage banks from parking funds
with it. In addition, it flushed the Indian banking system with liquidity in April 2020.
Banks responded by cutting their base lending rates and Marginal Cost of Lending
Rate (MCLR) but credit to commercial sector continued to see muted growth. Credit
creation was possibly limited by public holding more cash for meeting emergencies
and continued risk aversion of banks with their preference to invest in G-secs and
park excess funds with RBI. Yet, excess liquidity in the banking system remained high,
showing up in the steepening of yield curve in April 2020. However, towards the end
of April, as RBI conducted special OMOs, the yield on 10-year G-sec softened. The
closure of six debt schemes of Franklin Templeton Mutual Fund sustained the
elevated corporate bond yield that somewhat softened after RBI opened a special
window to meet with sudden demands for redemption.

Government of India has so far responded with two stimulus packages, first in late
March 2020 and another on 12th May, 2020. The Central government’s borrowing
program for FY 2020-21 has been raised by more than half to Rs. 12 lakh crore.
Subscription to market borrowings by FPIs is likely to be tepid if their present trend
of selling-off India’s equity and debt paper were to persist. Further, continued
injection of liquidity or surplus liquidity situation will ensure that interest cost of
government debt remains low with continuous softening of yields on G-secs.

Indian benchmark equity indices recorded largest gains in April 2020 after
plummeting in March 2020, buoyed by optimism over lockdown easing in major
global economies, stimulus packages by Central Banks and governments, expanding
business activity in China and encouraging COVID-19 drug trial results in the US.
IMF has projected India’s GDP growth in FY 2020-21 at 1.9 per cent and 7.4 per
cent a year later. Government is aware of the severity of lockdown on economic
activity in the country and is cautiously optimistic about the revival of growth later in
the year.

3
 Year on Year performance of Macroeconomic indicators:2020 vs 2019

Year-on-Year (YoY) improvement of the indicator.

Year-on-Year (YoY) deterioration of the indicator.
No change in Year-on-Year (YoY) performance.
All figures in percentage unless otherwise mentioned.
a) Economic Activity (Domestic & global): Improvement indicates rise in production indices, foodgrain stock, exports growth,
imports growth, sales growth, consumption growth & vice versa.
b) Inflation (Global and domestic): Improvement indicates fall in price & vice versa.
c) Fiscal: Improvement indicates increase in capex and fall in revenue expenditure, Govt’s market borrowings, G-sec and TB
yields & vice versa.
d) Money & Finance: Improvement indicates rise in credit growth, broad money, ECB registrations, FPI utilisation, net
purchase of forex, growth in equity indices and fall in policy and bank rates, bond yields, spot exchange rate & vice versa .
e) External balance: Improvement indicates rise in forex reserves, net FDI, net FPI and fall in prices of crude, gold and REER
& vice versa.

MACROECONOMIC INDICATORS 2020 vs 2019 ( YoY Performance ) JAN_20 FEB_20 MAR_20 APR_20
JP Morgan Global Composite PMI 52.2 46.1 39.2 26.5
Global economic
Global fuel prices growth -4.4 -18.9 -46.7 -63.3
activity
Global base metal prices growth 6.8 -6.4 -11.9 -17.5
Food-grain stock (lakh tonnes) 847.2 840.4 872.3
IIP manufacturing growth 1.6 3.1 -20.6
Eight core industries growth 1.4 7.1 -6.5
Supply PMI-manufacturing (index) 55.3 54.5 51.8 27.4
PMI-services (index) 55.5 57.5 49.3 5.4
Domestic Merchandize exports growth -1.7 2.9 -34.6 -60.3
real
Merchandize imports growth -0.7 2.5 -28.7 -58.7
economic
activity Electricity generation growth 3.1 11.4 -8.2 -29.9
Petroleum products consumption growth 0.1 4.5 -17.8 -45.8
Domestic sales growth of passenger cars -8.1 -8.8 -53.3
Demand
Domestic sales growth of commercial vehicles -14.0 -32.9 -88.1
Domestic sales growth of tractors 4.8 21.3 -49.9
Fertilizer sales growth 28.7 29.8 -1.6 53.4
Consumer Price Index (CPI)-headline 7.6 6.6 5.9
CPI-food 13.6 10.8 8.8 10.5
Inflation
CPI-core 4.3 3.9 4.0
Wholesale Price Index (WPI) 3.5 2.3 1.0
Gross Fiscal Deficit (per cent of 2019-20BE) 140.0 147.3
Net tax revenue receipts (per cent of 2019-20BE) 60.5 67.6
Goods & Srvices Tax (GST) growth 8.1 8.3 -8.4
Revenue Expenditure (per cent of 2019-20 BE) 81.7 88.3
Capital Expenditure (per cent of 2019-20 BE) 79.1 90.0
Fiscal
Centre's gross market borrowings (Rs. lakh cr) 7.0 7.1 7.1 0.6
State's gross market borrowings (Rs. lakh cr) 4.5 5.2 6.1 0.6
Net Bank credit to Government (Rs. lakh cr) 50.1 49.8 49.1 54.2
10 year G-Sec yield 6.8 6.7 6.4 6.7
364 days-TB yield 5.3 5.2 5.2 4.4
Non-food credit growth 8.0 6.9 6.7 6.7
Credit Growth in credit to MSMEs 1.0 0.6 1.1
Money & Growth in credit to NBFCs 32.2 22.3 25.9
Banking Broad money (M3) growth rate 11.3 10.2 8.9 10.7
Money
Demand deposits- Rs. lakh cr 15.5 15.8 17.4 15.9
Supply
Currency with public - Rs. lakh cr 22.2 22.6 23.5 24.2
Repo rate 5.2 5.2 4.4 4.4
Money Reverse repo rate 4.9 4.9 4.0 3.75
Market MCLR (1 Year) of SCBs 8.3 8.2 8.2 8.0
Term Deposit Rate for one year above 6.3 6.2 8.0 5.9
10 Year Corporate bond yield 7.7 7.4 7.5 7.3
Financial Bond
ECB registrations (USD billion) 8.4 4.2 7.4
Markets Market
FPI utilisation in G-Secs 71.3 72.9 53.9 55.2
Forex Net purchase/sale of Forex by RBI (USD billion) 10.3 9.1 -4.0 -0.3
Market Spot exchange rate (INR/USD) 71.3 71.4 74.4 76.2
Equity Growth in Sensex 14.7 12.6 -14.3 -21.5
Market Growth in NIFTY-50 12.7 10.2 -16.7 -23.4
Brent Crude Oil price (USD per bbl) 63.6 55.0 33.0 23.3
Crude oil - Indian basket (USD per bbl) 64.3 54.6 33.4 19.9
Gold price (USD per troy ounce) 1560.7 1597.1 1591.9 1683.2
External balance Real Effective Exchange Rate (REER) (index) 118.4 119.2 117.3 116.0
Forex reserves (USD billion) 471.3 481.3 477.8 481.1
Net FDI (USD billion) 5.8 2.0 2.9
Net FPI (USD billion) -0.1 1.0 -16.2
4
Global growth hits unprecedented Fig. 1: Real growth across countries and
depths of despair amidst COVID-19, country groups
substantial risks of even more severe
outcomes remain.

1.1 Global macroeconomic and

financial landscape is witnessing
unrivalled turmoil with Novel
Coronavirus emerging as the biggest
threat to economic growth since the
2008 financial crisis. The COVID-19
induced shock is extremely
unconventional in terms of its size and
uncertainty, with its impact dependent
on hard to predict factors like systemic
efficiency and intensity of social Data Source: World Economic Report, April 2020
distancing measures, fallout of supply Database (7th April).
chain and financial market disruptions
along side societal responsiveness. 1.4 April 2020 became the month of
While human mortality is rising “Global Lockdown” with world
continuously the world over, necessary economic activity coming to a standstill,
measures to contain the pandemic are as pointed by surveys of purchasing
resulting in unparalleled economic costs managers. JP Morgan Global Composite
as well, thereby making policy response PMI plummeted to 26.5 in April 2020,
to the crisis deeply challenging. down by a record 12.7 points from
March 2020 and far below its record low
1.2 As per IMF’s World Economic of 36.8 during the global financial crisis.
Outlook (WEO) (April 2020), the year Rates of decline in output, new orders,
2020-21 is projected to experience the new export business, employment and
worst recession since the Great backlogs of work all registered new
Depression, far worse than the Global series records in April 2020. The month-
Financial Crisis, with global growth on-month drop in both the
contracting by 3 per cent. Cumulative Manufacturing Output Index (12.3
loss to global GDP over 2020 and 2021 points) and Services Business Activity
is estimated at around USD 9 trillion – Index (12.8) has been the steepest so far.
greater than the economies of Japan and
Germany, combined. 1.5 Real GDP in the US declined 4.8
per cent in the first quarter of 2020, due
1.3 Growth in advanced countries, to contraction in consumer spending and
experiencing widespread and intense stoppage of output. Unemployment rate
virus spread, is projected to contract surged sharply to 14.7 per cent in April
sharply by 6.1 per cent in 2020. 2020 as against 4.4 per cent in March
Emerging Market and Developing 2020, shattering the post-World War II
Economies (EMDE), facing multi- record of 10.8 per cent in 1982. While
layered health, external, commodity and industrial output contracted by 15 per
confidence shocks are projected to cent (YoY) in April 2020, retail sales
contract by 1.0 per cent in 2020. contracted even more by 21.6 per cent
Excluding China, the growth rate for the (YoY).
group is expected to be (–) 2.2 per cent.

5
Fig. 2.A: PMI Manufacturing across single digit at 8.2 in April 2020 from
countries 39.3 in March 2020.

1.7 In Japan, the coronavirus impact

was delayed compared to other South
East Asian economies. While Japan's
industrial production declined by 3.7 per
cent in February 2020, its exports,
growing negatively in the previous
months, crashed by 11.7 per cent in
March 2020. In April 2020, COVID
impact continued with consumer
confidence falling by 30 per cent and
PMI Manufacturing declining, albeit
Data Source: IHS Markit. moderately, from 44.8 in March 2020 to
41.9 in April 2020.
Fig. 2.B: PMI Services across countries
1.8 China, the initial epicenter of the
outbreak, saw a record low output
growth for the January-March quarter at
(-)6.8 per cent. Industrial production
growth (YoY) picked up to 3.5 per cent
in April 2020 after declining by 1.1 per
cent in March and 13.5 per cent in
February 2020 respectively although
producer prices continued to be negative.
Decline in retail sales has also fallen by
half from (-)15.8 per cent (YoY) in
Data Source: IHS Markit. March 2020 to (-)7.5 per cent in April
2020. With exports growth turning
1.6 The Euro Area witnessed slower significantly positive in April 2020 to
growth of 1.2 per cent in 2019 vis-à-vis 3.5 per cent after three months of sharp
2018 (1.9 per cent), and is projected to decline, China’s trade balance moved
contract sharply by 7.5 per cent in 2020- from deficit position in March (USD (-
21 by WEO. The Euro government )6.8 billion) to a strong surplus position
estimated GDP growth for Q1:2020-21 (USD 45.34 billion). Importantly, the
at (-)3.2 per cent. Manufacturing and improvement in trade balance emerged
services PMIs in the Euro area hit record from pick-up in activity and not a
lows in April 2020. Decline in consumer decline.
confidence doubled while inflation came
below the 0.5 per cent mark in April 1.9 COVID-19 demand shock has
2020. UK’s industrial production adversely impacted consumption across
declined by 2.8 per cent in February metals and mining, as reflected in
2020, a consecutive decline since plunging global commodity prices.
December 2019 and its retail sales Energy sector which was already
contracted sharply by 5.8 per cent in battling a price crisis before the outbreak
March 2020. Like in the Euro Area, PMI has witnessed nose-diving of global
numbers of the UK also registered crude oil prices and erratic natural gas
historical low numbers in April 2020, prices over the prospects of large scale
with its construction PMI moving to drop in demand, especially from

6
emerging economies. Crude oil prices corporate and sovereign spreads with
remained in a state of flux, with WTI modest recovery in April 2020.
(West Texas Intermediate) crude futures
moving to unprecedented negative Fig. 4A: Global Equity Indices in 2020
territory in the second half of April 2020.
From January 2020 to April 2020,
commodity prices fell by 29 per cent1
with metals like copper falling about
16.12 per cent and natural gas prices
declining by 36.63 per cent.

Fig. 3: Commodity price movements

Data Source: Thomson Reuters.

Fig. 4B: 10 yr G-Sec yields across countries

Data source: IMF primary commodity price system.

1.10 This global shock would weigh

heavily on commodity exporters,
particularly from emerging market
countries, exacerbating the multi-layered
shocks of health costs and tighter global
financial conditions in these countries. Data Source: Thomson Reuters.
Lower oil prices, at the same time, will
save resources for domestic absorption 1.12 Currencies of commodity
for oil-importing countries like India. exporters amongst emerging markets
and advanced nations have depreciated
1.11 Amidst COVID-19, financial sharply since the beginning of the year,
markets are demonstrating their oldest while the US dollar and yen have
rule, “fear begets more fear”. Global appreciated by about 3 per cent in real
financial conditions tightened in March effective terms as at end March, and the
2020 with dramatic sell-offs in equity euro by some 2 per cent.
markets and widening of high-yield 1.13 Governments and Central Banks
the world over have deployed various
measures to stimulate the economy
1
Source: IMF primary commodity price system
2
Source: Copper, grade A cathode, LME spot price,
through liquidity support and regulatory
CIF European ports, IMF primary commodity price changes. Lowering of key policy rates
system and reserve requirements, quantitative
3
Source: Natural gas price index, IMF primary
commodity price system
easing measures, loan guarantees and

7
stimulus packages are among the Business sentiment in Q4:2019-20 as
initiatives taken by governments part of RBI’s Industrial Outlook Survey
globally. also saw improvement in production and
order books as compared to the previous
2. Indian economy had begun to quarter with positive sentiments on
regain momentum with clear signs of external demand.
uptick in consumption and investment
towards the end of Q3:2019-20, only to Fig. 5: Growth Rate in Index of Industrial
be halted by COVID-19 that made Production and Eight Core Industries
government enforce country-wide
lockdown in late March, 2020.

2.1 Index of Industrial Production

(IIP) rebounded from negative growth in
Q3:2019-20 to 2.1 per cent in January
2020, and 4.5 per cent in February 2020,
the highest level observed since July
2019. Mining (10 per cent) and
electricity (8.1 per cent) led the positive
growth. Within the use based segment,
primary goods and intermediate goods
continued to exhibit strong growth, Data Source: Department for Promotion of Industry
while movement in consumer goods and Internal Trade, Ministry of Statistics and
remained tepid. Core index representing Programme Implementation.
the eight core industries witnessed
highest growth at 5.6 per cent in 3. COVID-19 impact started
February 2020, after March 2019. Five unfolding in India in March 2020:
of the eight core industries registered a seven-day lockdown announced in
positive growth in output led by response.
electricity generation (11.0 per cent),
coal (10.3 per cent) and cement 3.1 With COVID-19 strengthening
production (8.6 per cent). On the its global impact in March 2020, the
external front, merchandize exports month in which its strike on India had
showed robust positive growth in just begun, business sentiment started to
February 2020 at 2.9 per cent after a gap plummet. RBI’s quick survey on
of 6 months. Exports of services also Industrial Outlook of the Manufacturing
registered a positive growth of 6.9 per Sector conducted in second half of
cent in February 2020 while imports March 2020 witnessed very sharp
grew by 12.8 per cent. Inflationary deterioration in business sentiments
pressures eased with CPI inflation across all sectors for Q4:2019-20; and
declining from 7.6 per cent in January stark pessimism for Q1:2020-21, when
2020 to 6.6 per cent in February. Food compared to their assessment given in
inflation (13.6 per cent) driven by onion the regular round of the survey (Jan-Mar
prices in January 2020 also fell to 10.8 2020). These sentiments got realized
per cent in February 2020. According to with export growth turning sharply
RBI's Consumer Confidence survey negative at (-) 34.6 per cent (YoY) in
conducted in the last week of February March 2020. All commodity groups
2020, consumer sentiment marginally registered negative export growth except
improved to 85.6 in March 2020 from for iron ore which grew by 58.4 per cent.
the all-time low of 83.7 in January 2020. Oil meals (-70 per cent), meat, dairy &

8
poultry (-45.5 per cent) and engineering per cent (YoY). For FY 2019-20,
goods (-42.3 per cent) experienced the industrial production declined by 0.7 per
largest downward movement. cent compared to last year. Eight core
Cumulative exports for FY 2019-20 industries also declined by 6.5 per cent
declined by 4.8 per cent (YoY) to USD (YoY) in March 2020, recording its
314.3 billion. Cumulative imports for steepest fall since 2012. Construction
FY 2019-20 declined by 9.1 per cent and manufacturing got disrupted with a
(YoY) to USD 467.2 billion. Imports 24.7 per cent fall in cement production
grew negatively at (-)28.7 per cent (YoY) and 13 per cent decline in steel output.
in March 2020, reflecting a weakening Energy industries tracked domestic and
of growth impulse within the country global bearish trends. While production
and disruption of global supply chain of petroleum refinery products fell by
feeding into the country’s imports. 0.4 per cent during the month,
Cumulative oil imports for FY 2019-20 consumption of petroleum products fell
fell to USD 129.4 billion (-8.2 per cent), much more by 17.8 per cent, the worst
while non-oil imports declined at (-)9.5 fall on record since 2004. Diesel
per cent to reach USD 337.8 billion. consumption was lower by 24.2 per cent
With these developments, merchandise and petrol sales fell by 16.4 per cent.
trade deficit for FY 2019-20 narrowed to
USD 152.9 billion as against a deficit of Fig. 7: Production and consumption of
petroleum products
USD 184.0 billion in the previous year.

Fig. 6: Import of Petroleum crude &

products and its share in total import

Data Source: PPAC.

Data on production for Apr-20 awaited.

3.3 The revival in electricity

Data Source: Department of Commerce, Ministry of
Commerce & Industry. generation that had commenced from
January 2020, turned around with a
3.2 India witnessed sharp sharp fall in power demand by 8.2 per
contractions in March 2020 both on the cent (YoY) in March 2020. COVID-19
production and consumption side with a brought further bad news for the auto
seven-day lockdown enforced in the last sector, which was already battling a
week of the month. Industrial production crisis before the outbreak. Sharp across-
steeply contracted by 16.7 per cent the board contraction in automobile
(YoY) in March 2020 with sales was seen in March 2020, with
manufacturing shrinking sharply by 20.6 greatest decline in commercial vehicles

9
(-88.1 per cent (YoY)) and passenger was evidence of unprecedented supply-
cars (-53.3 per cent (YoY)). These side disruption with input delivery
developments adversely impacted times lengthening to the greatest extent
market confidence with growth in during lockdown.
NIFTY-Consumption and Nifty-Auto
moving into negative territory in March 4.2 India’s Services Business
2020. Activity Index gravitated to new lows
from 49.3 in March 2020 to 5.4 in April
Fig. 8: Growth of Auto sales, Nifty indices 2020, with business activity falling at
(YoY) record lows, demand for services
collapsing and excess capacity leading
some firms to cut employment.

Fig. 9: PMI Manufacturing India and its

components

Data Source: Extracted from CMIE and NSE.

3.4 Lockdown induced supply chain

disruptions also negatively affected
infrastructure industries with domestic
air passenger volumes falling by 11.8
per cent4 (YoY) in March 2020 with Data source: IHS Markit.
railways freight traffic (-13.9 per cent)
Fig. 10: PMI Services India and its
and port traffic (-5.2 per cent) also
components
declining sharply.

4. India’s economic activity

(Manufacturing and Services) came to
standstill in April 2020 following the
preventive nationwide lockdown and
resulted in supply side disruptions and
demand falling to unprecedented lows.

4.1 India’s Manufacturing PMI fell

sharply from 51.8 in March 2020 to
27.4 in April 2020. Record contractions
in output, new orders and employment
reflected a severe deterioration in
demand conditions. Meanwhile, there
4
Data source: International Air Traffic Data source: IHS Markit.
Association (IATA)

10
4.3 Railways freight traffic declined weather during April this year weighed
by 35.5 per cent (YoY) in April 2020, heavily on power demand. Coal India
reflecting the laggard performance of Limited's (CIL) off-take of coal also
other input industries like cement, steel, plunged by 25.5 per cent (YoY) in April
power and coal. Cement traffic through 2020 to 39.1 million tonnes while CIL’s
railways fell drastically by 90.6 per cent coal production declined by 10.9 per
in April 2020 after declining by 26.3 per cent (YoY) to 40.4 million tonnes.
cent in March 2020. While movement of Limited activity in the thermal power
output like pig iron and finished steel sector in April 2020 is also corroborated
from steel plants was down by 45.3 per by a sharp 37.4 per cent fall in railway
cent (YoY) in April 2020, movement of freight movement of coal for thermal
inputs like coal and iron ore to steel plants. Incidentally, the capacity to
plants was down 37.2 per cent and 32.1 generate hydel power increased with
per cent respectively (YoY). Finished Central Water Commission’s data
steel consumption also declined sharply showing doubling of water levels in
for the second month with a (-) 90.9 per large reservoirs in early May 2020 as
cent (YoY) growth in April 2020. compared to the same month of the
previous year. This could possibly help
Fig. 11: Growth in railways freight traffic of fill the vacuum in thermal power
major commodities (YoY) generation in the coming months. With
most industries seeing a fall of railway
freight traffic movement, eight core
industries data of April 2020 is expected
to show a significant decline.
Fig. 12: Water reservoir levels

Data Source: Directorate of Economics and Statistics,

Ministry of Railways.

4.4 Even after partial easing of

COVID-19 lockdown, power demand
continued to decline for the second Data Source: Central Water Commission.
month in April 2020, falling
significantly by 29.9 per cent (YoY).
5 4.5 While railways freight
Negligible commercial and industrial movement remained subdued, there
activity, along with the relatively cool were indications of dry bulk trade
improving with Baltic Cape Index, as
reported by the Great Eastern Shipping
5
Power generation data for April 2020 sourced Co. Ltd, India’s largest private shipping
from Brookings India Electricity and Carbon
Tracker, underlying data from MERIT, Ministry company, recovering significantly to
of Power. 674.0 in April 2020 after moving into
negative territory (-243.0) for the first

11
time in February 2020 and March 2020 5.3 Due to nationwide lockdown
(-222.0). since last week of March 2020,
uncertainty in agricultural sector
5. Agriculture and allied activities regarding harvesting and procurement
showed continued resilience on the operations along with labour shortage
back of all-time highs in the production kept commodity arrivals and prices in
of food grains and horticulture, with wholesale markets volatile. Wheat
huge buffer stocks of rice and wheat procurement under central pool,
despite facing COVID-19 induced however, gathered momentum in April
supply chain disruptions. 2020 with 130 Lakh Metric Tonnes (LMT)
5.1 The total production of food- Fig. 13: Growth in Tractor sales and
grains during FY 2019-20 was estimated Fertiliser sales (YoY)
at 295.7 million tonnes6 compared to
285.2 million tonnes in FY 2018-19.
Food-grain output in FY 2019-20 was
25.9 million tonnes higher than the
average production of food-grains
recorded during the previous five years.

5.2 FY 2020-21 is also appearing to

be promising as pre-monsoon kharif
sowing had progressed strongly by first
week of May 2020, with acreage of
paddy up by 37 per cent and that of
pulses, coarse cereals and oilseeds
higher by 61 per cent, 66 per cent and 27
per cent respectively, as compared to
previous season. The Indian
Meteorological Department (IMD) has
forecasted a normal south west monsoon
for the 2020 season, with rainfall
expected to be 100 per cent of the long
period average. The cumulative rainfall Data Source: Ministry of Chemicals and Fertilizers,
received for the country as a whole Tractor Manufacturer association.
during the period 1st March, 2020 to
29th April, 2020 has been 26 per cent procured by the end of the month.
above normal. These developments bode Target of 400 LMT for the season is
well for agricultural production. likely to be achieved. 2.61 LMT of
However, subdued trends of rural Pulses and 3.17 LMT of oilseeds was
demand emerged in March 2020 with procured under Rabi 2020-21 season till
tractor and fertilizer sales declining by 2nd May 2020. Amidst severe challenges
49.9 per cent and 1.58 per cent of unloading of food grain stocks in
respectively. But a sharp pickup in COVID-19 affected areas and
fertiliser sales of 53.4 per cent was distribution of the same to states for
witnessed in April 2020, auguring some supply under PDS, railways freight
hopes of rural demand recovery. traffic movement of food-grains
witnessed a staggering 135.5 per cent
growth (YoY) in April 2020. Food
Corporation of India (FCI) moved 60
6
As per 3rd Advance Estimates, 2019-20 of D/o LMT food grains in the month of April
Agriculture, Cooperation and Farmers’ Welfare

12
2020 surpassing the highest ever single 2020 (2.26 per cent in February 2020)
month movement of 38 LMT achieved also reaffirmed weak demand pressure.
during March 2014 by 57 per cent. With Similar trend was also seen in CPI-AL
steady inflows of food grains through (Agricultural Labour) and CPI-RL
procurement, the overall central pool (Rural labour), which decreased from
stocks position remains stable after 10.14 per cent and 9.84 per cent
release of about 122 LMT stocks (by respectively in February 2020 to 8.98
end of April 2020) under various per cent and 8.69 per cent in February
schemes including National Food 2020.
Security Act and Pradhan Mantri Garib
Kalyan Ann Yojana. 6.3 Daily data on 22 essential food
items covered by the Department of
6. Inflation was on declining Consumer Affairs (DCA) suggests that
trajectory reflecting weak demand average retail prices increased by 4.2 per
pressures, and volatility in essential cent in April 2020 over March 2020.
commodity prices remained due to Price changes continued to remain
supply chain disruptions. volatile owing to supply side constraints
with price of potato (15.1 per cent), atta
6.1 Based on data gathered only up (wheat) (4.4 per cent) and pulses (9.2
to 19 March, 2020 due to lockdown,
th
per cent) having increased while onion
Consumer price inflation (CPI) showed (-10 per cent) prices declining sharply in
signs of price levels abating in March April 2020 over March 2020. These
2020, decelerating for the third month in results are visible in April 2020
a row. Growth in aggregate CPI index Consumer Food Price Inflation (CFPI)
was 70 bps lower at 5.9 per cent (YoY) excluding meat and fish, increasing by
in March 2020 as compared to 6.6 per 1.7 percentage points from March 2020
cent in February 2020. Food inflation to 10.5 per cent in April 2020.
also declined to 8.8 per cent in March Truncated data for WPI, however
2020 (10.8 per cent in February 2020). suggested food inflation easing to 3.6
per cent in April 2020 as against 5.49
Fig. 14: Rates of Inflation per cent in March 2020.

6.4 Prices of non-subsidised LPG

declined for three straight months with a
record Rs 162.50 per cylinder cut in
prices at end of April 2020, in line with
the slump in benchmark international
rates. Oil prices (Indian basket) declined
by 40 per cent from USD 33.36/bbl in
March 2020 to USD 19.90/bbl in April
2020.

6.5 The overall inflation outlook

remains benign with economic inactivity
leading to a broad-based deceleration in
price pressures, particularly energy.
Data Source: MoSPI and DPIIT. However, the supply chain constraints
have possibly acted on driving higher
6.2 Decline of Wholesale price food inflation in April 2020.
inflation (WPI) to 1 per cent in March

13
7. Foreign Portfolio Investors the rupee was bound to be under
(FPIs) continued to pull out funds pressure. Most emerging market (EM)
from capital markets in April 2020 currencies depreciated including the
amid COVID stress and the rupee Indian rupee which depreciated from
depreciated further. However, rupee 74.3 INR/USD in March 2020 to 76.2
outperformed its emerging market INR/USD in April 2020. Further the
peers, with a new found resilience in USD, which is considered as the safest
the forex market. and most liquid currency in the world,
appreciated by about 3 per cent from
7.1 Consequent to COVID-19 January 2020 to March 2020 against
outbreak, the surge in risk aversion of most currencies. However, the INR
investors triggered large capital outperformed most of the EM currencies.
outflows from emerging markets This may have been contributed by
including India. According to latest RBI’s presence in the forex market and
depositories data, March 2020 witnessed partly by improvement in external
the largest-ever foreign portfolio sector fundamentals from lower crude
outflow of USD 15.2 billion. Net FPI prices.
outflows declined in April 2020 and
stood at USD 1.9 billion. Both equity Fig. 16: EM currency movements* (Jan-
and debt markets experienced net Apr, 2020
outflows. Usually, FPI outflows prompt
domestic mutual funds to embrace
financial stocks and become net buyers
in the domestic equity market, which
was the case in March. However, in
April, mutual funds also witnessed
withdrawals to the tune of Rs. 17,760
crore in both equity and debt markets
combined. This may be attributed to the
Franklin Templeton episode.

Fig. 15: Capital market flows (FPI, MF)

Data source: IMF,
https://www.exchangerates.org.uk/
*appreciation (+)/depreciation (-)

Fig. 17: RBI’s net purchase/sale of USD

Purchase (+) , Sale (-)

Data Source: Central Depository Services Limited

(CDSL).

7.2 With FPIs exiting from Indian

equities for consecutive three months, Data Source: RBI.

14
7.3 Global oil demand dropped to its 8.2 Private transfer receipts, mainly
lowest since 1995, at 29 million barrels representing remittances by Indians
per day (mbpd), in April 2020, employed overseas, increased to USD
according to Energy Information 20.6 billion in Q3:2019-20, up by 9.0
Administration (EIA). Brent crude oil per cent from their level a year ago. Net
price, after nearly halving between external commercial borrowings (ECBs)
January and March 2020, plunged to a stood at USD 3.2 billion in Q3:2019-20,
two-decade low of USD 18.7 per bbl in 2019 compared with USD 2 billion a
April 2020. The Indian basket of crude year earlier. Indian corporates turned to
oil averaged only a bit higher at USD ECBs as bond investors and traditional
19.9 per bbl during the month. lenders became risk averse following the
collapse of the IL&FS group in
7.4 Gold prices spiked by as much September 2018. This was
as 8.3 per cent in the first 14 days of complemented by benign global
April 2020, riding on the yellow metal’s financial conditions allowing cheap and
safe haven appeal. Prices hovered easy dollar funding.
around the USD 1,700 per troy ounce
mark in the second fortnight of April 8.3 Net Foreign Direct Investment
2020, which was its highest valuation in (FDI) inflows rose from USD 1.98
the last seven years. The gold rally had billion in February 2020 to USD 2.87
started in May last year on fears of the billion in March 2020, resulting in
global economy slowing down. This cumulative net inflows of USD 42.7
transformed into a more definite billion during FY 2019-20 (April-
expectation of a global recession with March), up from USD 30.7 billion a
Covid-19 pandemic hitting every corner year ago.
of the world.
8.4 Net FPI, however has challenged
8. India's external sector the BoP as it witnessed a sharp outflow
acquired resilience manifest in of USD 16.16 billion in March 2020
improvement in balance of payments from an inflow of USD 1.02 billion in
position, manageable current account February 2020, resulting in cumulative
deficit (CAD) and prudent external net outflow of USD 0.14 billion in FY
debt. India’s foreign exchange 2019-20, compared to net outflow of
reserves continued to be robust and USD 0.62 billion last year.
available to finance more than eleven
months of imports. India’s current 8.5 During COVID-19 times, the
account balance is expected to be external debt and its repayment burden
near zero or even in small surplus in is a major challenge being faced by
Q1:2020-21. some emerging market economies.
However, India is not vulnerable on this
8.1 India's CAD narrowed to 0.2 per count as its external debt to GDP ratio
cent of GDP in Q3:2019-20 from 2.7 per has remained low at about 20 percent
cent in the same period a year ago on the during the last three years.
back of lower trade deficit and rise in India's external debt outstanding as on
net service receipts. The narrowing is 31st December, 2019 stood at USD
also perceptible in April-December 563.9 billion (20.1 percent of GDP),
period with CAD declining from 2.6 compared to USD 543.1 billion (19.8
percent of GDP in 2018-19 to 1 percent percent of GDP) as on 31st March 2019.
in 2019-20. India’s key external debt vulnerability
indicators as at end December, 2019

15
have been low and range-bound than 11 months as on 1st May, 2020.
compared to March, 2019, with debt Sharp decline in crude oil prices and
service ratio at 6.4 per cent (35.3 per depressed domestic demand for gold
cent), ratio of forex reserves to total imports may have nullified the impact of
external debt at 81.5 per cent (7 per cent) FPI flight on reserves.
and ratio of short-term debt to forex
reserves at a manageable 23.2 per cent Fig. 19: India’s Forex reserves as percent of
(146.5 per cent). IMF’s ARA EM metric

Fig. 18: India’s External debt

Data source: IMF.

8.7 India’s merchandise exports

Data Source: DEA, M/o Finance. exhibited a sharper negative growth
from (-)34.6 per cent (YoY) in March
8.6 Going by the IMF’s assessment
2020 to (-)60.3 per cent in April 2020 to
of ‘reserves adequacy’ emerging
reach USD 10.36 billion. Merchandise
markets metric (ARA EM)7, a measure
imports also registered a sharper
that determines external debt servicing
negative growth in April 2020 at (-)58.7
ability, India’s ratio of reserves to ARA
per cent (YoY), as compared to (-)28.7
EM metric in 2019 stood at 157.98 per
per cent in March 2020 to reach USD
cent, well above the safe range and
17.12 billion. This yielded a fall in
much better than China (82.8 per cent),
merchandise trade deficit from USD 9.8
South Africa (73.2 per cent) and most of
billion in March 2020 to USD 6.8
its emerging market peers. Despite
billion in April 2020.
facing massive sell offs in the equity
market amid fear surrounding COVID- Fig. 20: India’s merchandise trade balance
19, India’s foreign exchange reserves
continued to stand strong at USD 481.1
billion with an import cover of more

7
The ARA EM metric comprises four components
reflecting potential drains on the balance of payments: (i)
export income to reflect the potential loss from a drop in
external demand or a terms of trade shock; (ii) broad money
to capture potential residents’ capital flight through the
liquidation of their highly liquid domestic assets; (iii) short-
term debt to reflect debt rollover risks; and, (iv) other
liabilities to reflect other portfolio outflows. The relative
risk weights for each component are based on the 10th
percentile of observed outflows from EMs during exchange
market pressure episodes.
8
Reserves in the range of 100-150 percent of the composite Data Source: Department of Commerce, Ministry of
ARA metric are considered broadly adequate for Commerce & Industry.
precautionary purposes.

16
8.8 Coupled with a sharp decline in Fig. 21: Net liquidity injection (+)/
export growth due to global slowdown absorption (-) by RBI
and an even sharper decline in import
growth due to suppressed domestic
activity, a surplus in current account
balance is expected to emerge in Q4 of
FY 2019-20.

9. RBI’s sustained liquidity

operations flushed the Indian banking
system with liquidity in April 2020.
However, banks’ response remained
lukewarm and credit to commercial
sector continued to see muted growth. Data Source: RBI.

9.1 Since the imposition of 9.2 In response to policy rate cuts,

lockdown to fight COVID-19, the RBI the base lending rate as on 1st May, 2020,
has been intervening in a calibrated stands reduced to 8.15/9.40 per cent
manner to ensure conducive financial from 8.95/9.40 per cent on the
conditions and normalcy in the corresponding day of the previous year.
functioning of the economy. RBI Banks have also reduced Marginal Cost
reduced the repo rate by 75 bps to 4.4 of Lending Rate (MCLR) to 7.10/7.50
per cent (27th March, 2020) and the per cent from 8.05/8.50 per cent a year
reverse repo rate by 115 bps to 3.75 per ago. Term deposit rate for above one
cent (17th April, 2020) to enable better year also stands reduced to 5.7/6.0 per
credit flow to the financial market and cent from 6.25/7.50 per cent.
eventually to small businesses. Apart
from these, RBI has also undertaken 9.3 As on 24th April 2020, growth of
several unconventional measures to M3 (Broad Money) increased to 10.7
ensure adequate liquidity at the longer per cent (YoY), as compared to 10.0 per
end of the yield curve. These include cent a year ago with growth seen more
long term repo operations (LTRO) and in cash with the public and time deposits
targeted LTRO (TLTRO) to encourage and a fall seen in demand deposits.
flow of funds from banks to small and These figures are suggestive of public
mid-sized corporates, Non-Banking increasingly accumulating cash in
Financial Corporations (NBFCs) and anticipation of emergencies.
Micro Finance Institutions (MFIs). RBI
also announced a special refinancing 9.4 On the credit front, banks
facility for the rural sector. Further, on showed tepid response to RBI’s liquidity
27th April, 2020, the RBI opened a operations and remained risk averse to
special liquidity window of Rs. 500 on-lending. Bank credit growth recorded
billion for mutual funds to alleviate the a 0.7 per cent decline in the fortnight
redemption pressure in the aftermath of ending 24th April, 2020 compared to the
Franklin Templeton winding up six of previous fortnight. On a YoY basis, it
its debt funds. Since 6th February, 2020, decelerated sharply by almost half to 6.7
RBI has infused liquidity amounting to per cent this year compared to 13.0 per
more than 3 per cent of GDP. cent in the corresponding period last
year. Bank credit to commercial sector
also fell by 0.7 per cent in the fortnight
ending 24th April, 2020 compared to the

17
previous fortnight, registering a sharp 10. Excess liquidity in the banking
decline in growth rate from 12.3 per cent system along with reverse repo cut
(YoY) in 2019 to 6.8 per cent in 2020. weighed on bond markets leading to
Credit-deposit ratio eased to 74.9 as on steepening of yield curves in April 2020.
24th April, 2020 from 75.4 per cent a
fortnight ago and 77.1 per cent a year 10.1 Despite sustained liquidity
ago, thereby further building liquidity surplus in the banking system, NBFCs
surplus in the banking system. More and MFIs continued to face liquidity
liquidity implies lower liquidity pressure as banks were reluctant to on-
premium and thereby lower cost of lend to them and considered it safer to
credit/yield and higher credit offtake. park excess funds with RBI.
RBI’s sustained liquidity operations
augur well for increasing credit offtake 10.2 Surplus liquidity showed up in
via a lower liquidity premium for banks. declining of average daily turnover in
However, risk premium by banks, which the call money market to Rs. 0.22 lakh
is harder to target continues to remain crore in April 2020, less than half of the
high. average turnover of Rs. 0.47 lakh crore
in March 2020. Consequently, the
9.5 Banks’ investment in G-Secs weighted average call rate (WACR)
accelerated sharply to 14.1 per cent averaged closer to the reverse repo, at
(YoY) as on 24th April 2020 from 9.1 4.01 per cent in April 2020 when
per cent a fortnight ago and 2.8 per cent compared to 4.94 per cent in March
a year ago, leading to an investment- 2020.
deposit ratio of 28.95 per cent, much
higher than the Statutory Liquidity Ratio 10.3 The steepening of yield curve
(SLR) of 18.0 per cent. The extent of followed with daily weighted average
risk aversion of banks was further yield on G-secs with one-year residual
reflected in banks parking a staggering maturity falling by 81 bps, 5-year
Rs. 7.36 lakh crore under RBI’s safe residual maturity by 41 bps and 10 year
mode reverse repo window on 30th April, residual maturity by 16 bps from 31st
2020, despite an unattractive rate of 3.5 March, 2020 on 30th April, 2020.
per cent. Subsequently, the RBI conducted
special OMOs (buying long term papers
Fig. 22: Liquidity operations in RBI’s and selling short term securities) as
Reverse Repo window announced on 27th April, 2020 to ease
the elevated term premia. Consequently,
RBI’s special OMO along with
secondary market debt auctions softened
10-year G-Sec yields further to 5.73 per
cent on 8th May, 2020, reaching their
lowest since 2009. Typically, when the
Central Bank's stance of monetary
policy is accommodative, as the RBI's
current stance is, the yield spread is
expected to be much lesser. However,
yield on the 10-year G-Sec yield is still
133 bps above the RBI's repo rate as on
8th May, 2020.
Data source: RBI.

18
Fig. 23: Yield on Residual Maturity of opening a Rs 50,000 crore window for
Government of India Dated Securities in mutual funds and regulatory benefits to
Secondary Market all banks under Statutory Liquidity
Facility - Mutual Funds (SLF-MF),
corporate bond yields have eased to 7.2
per cent as on 8th May, 2020.

Fig. 25: Benchmark bond yields

Data source: Clearing Corporation of India (CCIL)

10.4 In the corporate bond market,

RBI’s TLTRO auctions combined with
surplus system liquidity to result in 43
per cent increase in funds raised by Data Source: FBIL, CMIE
Indian corporates from the primary 10.6 The credit spread however
market during April 2020 compared to continues to remain wide at more than
March 2020. This may suggest that large 100 bps in first week of May, 2020. In
corporates are accessing liquidity from times of unquantifiable uncertainty
the market at lower cost. brought in by COVID pandemic, credit
spreads may take a while to narrow.
Fig. 24: Primary corporate bond market

11. Expansionary fiscal policy is on

course in FY 2020-21 to mitigate the
adverse economic impact of COVID-19,
with increase in market borrowings by
Central and State governments. As on
May 1, 2020, while Centre raised 88
per cent of its gross borrowings in the
corresponding period last year, States
raised more than 1.7 times, both on
gross and net basis.

Data source: CMIE Prowess. 11.1 For FY 2019-20, fiscal deficit

was budgeted at 3.3 per cent of GDP,
10.5 Yet, 10 year AAA corporate which was revised to 3.8 per cent. This
bond yields rose from 7.15 per cent on was consistent with Centre’s net revenue
24th April, 2020 to 7.52 per cent on 30th receipts growing by 8.9 per cent during
April, 2020 after Franklin Templeton April-February of FY 2020-21 over the
Mutual Fund voluntarily closed its six corresponding period of FY 2019-20,
debt schemes citing redemption pressure. while total expenditure increased by
With RBI’s timely intervention of 12.6 per cent in this period to Rs. 24.7

19
lakh crore. Revenue and capital Fig. 26: Market borrowings of Government
expenditure grew by 12.8 per cent and
11.4 per cent respectively during this
period. Growth in GST collections
declined from 8.3 per cent (YoY) in
February 2020 to (-)8.4 per cent in
March, 2020.

11.2 Central Government on 31st

March, 2020 announced that it will
borrow Rs. 4.88 trillion or 62.56 per
cent of the FY 2020-21 gross borrowing
target in April-September, more than
half the budgeted amount half way into
the year. With RBI raising limits of
Ways and Means Advances (WMA) for
Centre and states in April 2020, the Data Source: RBI
Central government increased the
utilization of this window to reach 56 11.5 Yet, surplus liquidity in the
per cent of the limit as on 24th April, banking system resulted in 10-year G-
2020. State governments, however, only Sec market yields falling by 29 bps
used up 2.1 per cent of the limit during April 2020, although, they started
available, relying more on market to rise in the second half of April 2020.
borrowings.
11.3 Government of India in 11.6 With RBI conducting special
consultation with RBI has revised Open Market Operation (OMO)
issuance calendar for marketable dated (purchase of long term and sale of short
securities for the remaining period of term G-Secs for Rs. 10,000 crore each)
H1:2020-21 (11th May to 30th September, on 27th April, 2020 and secondary
2020). In this period, Government plans market debt auctions subsequently,
to borrow 6 lakh crore as against its yields eased by as much as 111 bps from
original plan (Rs. 4.88 lakh crore 6.84 per cent on 3rd April, 2020 to 5.73
announced on March 31). The estimated per cent as on 8 May, reaching their
gross market borrowings of the Centre lowest since 2009.
in FY 2020-21 has been revised upwards
by 53.8 per cent to Rs. 12 lakh crore in 11.7 In April 2020, RBI also
place of Rs.7.8 lakh crore as per BE introduced a separate Fully Accessible
2020-21, necessitated on account of Route (FAR) for investment by non-
COVID-19 pandemic. residents in specified G-Secs with such
securities attracting no foreign portfolio
11.4 In so far as actual borrowings in investor (FPI) limits until maturity.
FY 2020-21 are concerned, Centre's Overall FPI investment limit as
gross market borrowings picked up in percentage of outstanding government
the week ending 1st May, 2020 to reach stocks for FY 2020-21 was kept
Rs. 60,000 crore, 88 per cent of the unchanged. With continuous selling in
amount borrowed in the corresponding G-Secs by FPIs post emergence of
period of last year. States continued to COVID, general category FPI utilisation
be active borrowers in April 2020, of investment limit in Central G-Secs
raising more than 1.7 times both on has fallen to 55.2 per cent as on 30th
gross and net basis compared to last year. April, 2020, compared to the peaks of

20
over 75 per cent at the beginning of aggressive monetary policy to revive the
2020. economy also boosted global market
sentiment. Government of India
12. Indian benchmark equity permitted industries in green and orange
indices recorded largest gains in April zones to start operations from 20th April,
2020 after plummeting in March 2020, 2020 and gave its nod for functioning of
buoyed by optimism over lockdown neighbourhood and standalone shops
easing in major global economies, from 25th April, 2020.
stimulus packages by Central Banks
and governments, expanding business 12.3 Sectoral indices also sustained
activity in China and encouraging the market gains in April 2020. Top
COVID-19 drug trial results in the US. gainers were drugs and pharmaceutical,
petroleum products, automobile and
12.1 Nifty 50 and Sensex recorded metals whose stocks yielded 20-30 per
large gains in April 2020, helping them cent returns during the month. The
recoup losses driven by the Covid-19 laggards were transport services,
outbreak. Nifty 50 and BSE Sensex rose electricity, machinery and gems &
by 14.7 per cent and 14.4 per cent jewellery which posted single-digit
(MoM) respectively in April 2020 after returns.
a sharp decline of 23 per cent (MoM) in
March 2020. 13. IMF has projected India’s GDP
growth at 1.9 per cent in FY 2020-21
Fig. 27: Stock market movements but Government is cognizant of the
relative severity of lockdown on
economic activity in the country and is
cautiously optimistic about the signals
from Indian benchmark equity indices.

13.1 In February 2020, National

Statistical Office had estimated real
GDP growth for FY 2019-20 at 5.0
per cent and this was before COVID-19
made its presence felt in India. The last
week of March 2020 was, however,
clearly a COVID-19 impacted month as
India closed FY 2019-20 with a
lockdown of one week. This guided
IMF’s downward revision of India’s
GDP growth estimates of FY 2019-20 to
Data Source: RBI. 4.2 per cent in its WEO statement of
April 2020.
12.2 The surge in equity market
indices in April 2020 happened as 13.2 For FY 2020-21, the Economic
equity markets tracked gains in global Survey in January, 2020 projected
peers on optimism about a COVID-19 India’s GDP growth at 6-6.5 per cent.
drug to treat the pandemic that has However, WEO of April, 2020, after
brought the world to a standstill. factoring in the COVID-19 impact, has
Stimulus packages by Central Banks and projected India’s GDP in FY 2020-21 at
governments across the globe and the 1.9 per cent.
US Federal Reserve’s commitment to

21
13.3 Within the global downturn, India’s growth emerge from the high
India is among the handful of countries possibility of global slowdown
that is projected by IMF to have positive deepening and supply chain disruptions
growth in FY 2020-21. In fact, India’s getting exacerbated due to prolonged
growth is the highest estimated growth spread of COVID-19 and lockdowns
by IMF for FY 2020-21 among G-20 across countries.
economies, with the country expected
to post a sharp turnaround and resume 13.5 As India continues to tackle the
its pre-COVID trajectory by growing at health crisis unleashed by the COVID
7.4 per cent in FY 2021-22. pandemic, the focus has now shifted to
revive the economy which has been
13.4 These are still early days in FY debilitated by the lockdown.
2020-21 and COVID-19 is yet to abate Government of India and RBI are
in India. The country’s actual GDP working towards implementing
growth in FY 2020-21 will be substantial targeted fiscal and monetary
contingent upon the intensity, spread measures to support affected sectors of
and duration of the COVID-19 the economy.
pandemic within national territory. On
the external front, downside risks to

*****

For any queries, you may contact the team:

1. Shri Rajiv Mishra, Economic Adviser (E-mail: [email protected])

2. Ms. Tulsipriya Rajkumari, Deputy Director (E-mail: [email protected])
3. Ms. Sanjana Kadyan, Assistant Director (E-mail: [email protected])
4. Shri Manoj Kumar Mishra, Assistant Director (E-mail: [email protected])
5. Shri Pradyut Kumar Pyne, Economic Officer (E-mail: [email protected])
6. Shri Narendra Jena, Economic Officer (E-mail: [email protected])

22