The RBI has slashed GDP growth estimate for the current fiscal to 6.1 percent from its earlier forecast of 6.9 percent during the August policy review.
“Various high-frequency indicators suggest that domestic demand conditions have remained weak. The business expectations index of the Reserve Bank’s industrial outlook survey shows muted expansion in demand conditions in Q3 (October-December),” the RBI Monetary Policy document said.
“Export prospects have been impacted by slowing global growth and continuing trade tensions,” the document added.
The Reserve Bank’s Monetary Policy Committee (MPC) also cut its repo rate by 25 basis points to 5.15 percent in a bid to boost the flow of credit and support economic growth.
One basis point is a hundredth of a percentage point.
The central bank also decided to continue with an accommodative stance “as long as it is necessary” to revive growth, while ensuring inflation remains within the target.
The central bank is hopeful that the impact of lower interest rates since February 2019 is gradually expected to feed into the real economy and boost demand.
“Several measures announced by the Government over the last two months are expected to revive sentiment and spur domestic demand, especially private consumption,” the document said.
The RBI expects GDP to grow 5.3 percent in the July-September quarter, slightly better than the six-year low of 5.0 percent seen during the April-June quarter.
GDP growth during the second half of this fiscal is expected to be the range of 6.6-7.2 percent, as against the earlier estimate of 7.3-7.5 percent.
Source : http://tiny.cc/g7txdz