The Reserve Bank of India (RBI) has brightened its outlook on the Indian economy, which had suffered a severe setback after the outbreak of Covid-19.

The central bank has pegged the GDP growth rate at 10.5% for the financial year beginning 1 April 2021, more or less in line with the government’s projection of 11%.

"Going forward, the Indian economy is poised to move in only one direction and that is upwards," RBI governor Shaktikanta Das said while unveiling the bi-monthly monetary policy.

Supporting the Union Budget 2021-22 for providing impetus to the revival of sectors such as health and well-being, infrastructure, innovation and research, the RBI governor said this would have a cascading multiplier effect going forward, particularly in improving the investment climate and reinvigorating domestic demand, income and employment.

"It is our strong conviction, backed by forecasts, that in 2021-22, we would undo the damage that COVID-19 has inflicted on the economy," he added.

Rural demand is likely to remain resilient on good prospects of agriculture. On the other hand, urban demand and demand for contact-intensive services is expected to strengthen with the substantial fall in Covid-19 cases and the spread of vaccination.

The RBI in its monetary policy statement said that consumer confidence is reviving while business expectations of manufacturing, services and infrastructure remain upbeat.

Public investment will likely accelerate due to the “fiscal stimulus under AtmaNirbhar 2.0 and 3.0 schemes of government" while private investment is expected to "remain sluggish amidst still low capacity utilisation".

Said Das, “Real GDP growth is projected at 10.5% in 2021-22 – in the range of 26.2 to 8.3% in H1 and 6% in Q3."

Recently, the Economic Survey projected the Indian economy to grow at 11%, from an estimated record decline of 7.7% in 2020-21, on account of the Covid-19 pandemic.