The newly-constituted Monetary Policy Committee (MPC) of the Reserve Bank of India said on Friday that India’s economy is likely to contract by 9.5% in the current fiscal year ending March. RBI Governor Shaktikanta Das said the Indian economy is entering into a decisive phase in the fight against the coronavirus pandemic.

Das said the country’s economic activity stabilised in the second quarter after the GDP contracted by 23.9% in the first quarter (April-June). He added that the contraction witnessed in the first quarter is “behind us” and the silver linings are now visible, and highlighted the uptick in the manufacturing sector, and energy consumption, among others. The RBI governor added that merchandise exports are slowly catching up the pre-COVID levels.

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Inflation is likely to ease to the target level in the fourth quarter of 2020-21, according to the RBI Governor. The retail inflation (CPI), which is factored by the RBI in its monetary policy, has remained above 6% in recent months, as the government has tasked the central bank to keep the rate at 4%, with a margin of 2% on either side.

Das also said growth is likely to pick up in the second half of the fiscal and enter into the positive zone in the January-March quarter.

The newly-constituted MPC announced that the repo rate is left unchanged. The three-member MPC voted on the decision after three-day deliberations. RBI had last revised its policy rate on May 22, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.

The outbreak of coronavirus and resultant lockdown had severely hit the economic activities in the country.