The Q1 FY21 GDP is at -23.9%, The sources reported that it’s the biggest crash in over 40 years
In the context of GDP negative growth reported , the inflation outlook is highly uncertain. Turning to the growth outlook, economic activity other than agriculture is likely to remain depressed in Q1:2020-21 in view of the COVID- 19.
Negative growth is a contraction in business sales or earnings. It is also used to refer to a contraction in a country's economy, declined GDP over the several quarters of a given year. It is typically expressed as a negative percentage rate.
- Negative growth often termed as a sign of a possible recession or depression.
- The 2020 COVID-19 pandemic and the Great Recession of 2008 were the last times the U.S. economy experienced significant negative growth.
The Great Recession began in 2008 and continued into 2010. The GDP growth rate in 2008 was -0.1% and in 2009 it was -2.5%. The GDP growth rate bounced back to positive in 2010 with a rate of 2.6%. Although the announcement of negative growth strikes fear into investors and consumers, it is just one of many factors that contribute to a recession or depression.
Economy likely to witness higher rate of unemployment, lower levels of industrial production, and a shrinking earnings patterns. Not to forget , the macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated, and various sectors of the economy are experiencing acute stress.
Further , Contraction in GDP calling for rethinking budget estimates and projections.
RBI is of opinion to adopt accommodative stance to revive growth in order to mitigate the impact of COVID-19 on the economy.
Going forward, Central Bank expects the gradual improvement in activity indicators (remaining well below pre-Covid levels) the growth recovery will be gradual and contracting for all quarters in FY2021.
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