rate at 3.6 per cent. However, if the lockdown continues beyond mid-May and a gradual recovery takes root only from June-end, GDP may contract by 2.1 per cent — the lowest in the last 41 years and only the sixth instance of contraction since 1951-52. GDP shrunk by 0.4 per cent in 1957-58, 2.6 per cent in 1965-66, 0.1 per cent in 1966-67, 0.6 per cent in 1972-73 and 5.2 per cent in 1979-80.
The proactive intervention of the Reserve Bank of India (RBI) notwithstanding, the spillover impact of the Covid-19 pandemic has percolated into the financial markets as well, choking the credit channels and raising the risk aversion, the agency said.
There is no shortage of liquidity in the system. The RBI injected liquidity worth about 3.2 per cent of GDP since February 2020, and the systemic liquidity surplus, as reflected in net absorptions under the liquidity adjustment facility, averaging Rs 4.36 trillion during March 27-April 14, it said.
Yet, the spread between the repo rate and capital market instruments, which were either flat or declining since the beginning of March 2020, started inching up after March 13.