Economic Activity Stabilizing In Q2: RBI

High frequency indicators suggest that economic activity is stabilising in Q2:2020-21 after the 23.9 per cent year-on-year (y-o-y) decline in real GDP in Q1 (April-June), the RBI has said in its Monetary Policy statement.

"On the domestic front, high frequency indicators suggest that economic activity is stabilising in Q2:2020-21 after the 23.9 per cent year-on-year (y-o-y) decline in real GDP in Q1 (April-June).

Cushioned by government spending and rural demand, manufacturing - especially consumer non-durables - and some categories 2 of services, such as passenger vehicles and railway freight, have gradually recovered in Q2. The outlook for agriculture is robust. With merchandise exports slowly catching up to pre-COVID levels and some moderation in the pace of contraction of imports, the trade deficit widened marginally sequentially in Q2," the Monetary Policy Statement read.

As regards headline CPI inflation, the statement said that it increased to 6.7 per cent during July-August 2020 as pressures accentuated across food, fuel and core constituents on account of supply disruptions, higher margins and taxes.

"One year ahead inflation expectations of households suggest some softening in inflation from three months ahead levels. Selling prices of firms remain muted, reflecting the weak demand conditions," the statement released by RBI observed.

The cetral bank's Monetary Policy Statement, 2020-21 Resolution of the Monetary Policy Committee (MPC) October 7-9, 2020 was released today.