Focus: GS-III Indian Economy
Why in news?
Crisil Research said India’s Gross Domestic Product (GDP) would shrink 9% in FY21, wider than its May 2020 estimate of a 5% contraction.
Revenue shortfalls in India, the major economy hardest hit by the COVID-19 pandemic, are likely to force the Centre to borrow more, but it will only consider monetising its deficit as a last resort.
- This rate of fall has not been seen since the 1950s.
- If the pandemic were to peak out in September-October, GDP growth could move into mildly positive territory towards the end of the current FY.
- Borrowing plans for the second half of the financial year, will be reviewed by government and Reserve Bank of India (RBI) officials.
- RBI could ease liquidity through open market operations to keep yields in check while helping the government to raise borrowing, already targeted at a record ₹12 lakh crore.
- RBI has pumped in over ₹11 lakh crore of liquidity into the market, helping to keep 10-year bond yields below 6% even as the government decided to borrow 70% more than last year as a result of the pandemic.
-Source: The Hindu