Borrowing costs have dropped to lowest in a decade due to abundant liquidity, Das said during his address

• NBFC commercial papers have softened to 3.8% as of July 31.
• Rates have fallen to 3.4% for non-NBFC borrowers, as of July 31.

India’s real gross domestic product is expected to contract in the first half of the current financial year, the RBI governor said.

“Real GDP Growth for full year of FY 2020-21 estimated to be in negative as well.”

• Imports fell sharply in June in a broad based banner, merchandise trade balance recorded a surplus in June at $0.8 billion after a gap of 18 years.
• Forex reserves have increased by $56.8 billion to $534.6 billion in the current financial year between April to July.
• Early containment of Covid-19 may impart an upside to the outlook.

The committee expects headline inflation to remain elevated in Q2FY21, said the RBI governor. Headline inflation which was 5.8% in March was placed at 6.1% in the provisional estimates for June 2020, he said, adding that inflationary pressures were evident across all subgroups.

“Headline inflation likely to ease in H2FY21, aided by favourable base effects.”

The Indian economy had begun to recover from the lows of April and May, but the surge in cases have led to localized lockdowns, because of which several high frequency indicators have leveled off, says RBI governor.

Agriculture sector prospects have strengthen by the progress of the south west monsoon and the total area sown under kharif crops. Agriculture sector prospects have strengthened by the progress of the south west monsoon and the total area sown under kharif crops.

India’s Monetary Policy Committee led by central bank Governor Shaktikantha Das unanimously decided to leave the repo rate unchanged at 4%.

In their meeting on 4th, 5th and 6th Aug., the MPC sifted through global conditions and evaluated their global impact on the outlook for India, Das said. The Committee is continuing with its accommodative stance as long as needed to revive growth and mitigate the risks brought on by the Covid-19 pandemic, the governor said.

While space for further monetary policy action is available it is important to use it judicially to maximise the beneficial effects on the underlying economy, Das said. As for now, a cumulative reduction of 250 basis points [in the policy rate] is working its way through in money, bond and credit markets and narrowing down the spreads, he said.

• Global economy activity has remained fragile and a renewed surge in Covid-19 infections in July has subdued early signs of revival
• Global financial markets have been buoyant with return of risk off sentiment inserting a disconnect from the underlying state of the real economy
• Portfolio inflows to emerging markets have resumed.