COVID-19 has hit India hard and the path ahead is shrouded with uncertainty, the RBI has said in its annual report for 2019-20.
"While the path ahead is still shrouded with high uncertainty, sifting through the experience of the year gone by could fortify this resolve and marshal the grit and resources to deal with the challenges that confront us in 2020-21 and beyond over the medium-term," the Reserve Bank has said in its annual report.
According to the country's central bank, until the onset of COVID-19, the moderation in India's growth trajectory reflected cyclical forces, both global and domestic.
"The global drivers included softer external demand, new automobile emission standards in several parts of the world, weaker macroeconomic conditions because of idiosyncratic factors in a group of systemic EMEs, trade tensions and broader global trade policy uncertainty, the possibility of a no-deal Brexit and the slowdown in China.
The domestic factors took the form of inventory overhang in the real estate sector, followed by unfavourable terms of trade sapping rural demand, a slump in gross fixed capital formation from Q4:2018- 19 and contraction in merchandise exports from Q1:2019-20 and imports from Q2:2019-20," the RBI annual report notes.
"Going forward, government consumption is expected to continue pandemic-proofing of demand, and private consumption is expected to lead the recovery when it takes hold, with non-discretionary spending leading the way until a durable increase in disposable incomes enables discretionary spending to catch up," the central bank has stated.