The Reserve Bank on Friday reduced India’s economic growth forecast to 6.1 per cent for 2019-20 due to a continued weak consumer sentiment along with subdued global markets.
The RBI’s monetary policy committee (MPC) in its fourth policy review of the current fiscal reduced the growth rate to 6.1 per cent from 6.9 per cent in FY2019-20.
“Real GDP growth for 2019-20 is revised downwards from 6.9 per cent in the August policy to 6.1 per cent — 5.3 per cent in Q2:2019-20 and in the range of 6.6-7.2 per cent for H2: 2019-20 — with risks evenly balanced; GDP growth for Q1: 2020-21 is also revised downwards to 7.2 per cent,” the policy statement.
Consequently, the RBI’s monetary policy committee (MPC) reduced the repo, or short term lending rate for commercial banks, by 25 basis points to 5.15 per cent from 5.40 per cent.
It also maintained its accomodative stance.
“While the recent measures announced by the government are likely to help strengthen private consumption and spur private investment activity, the continuing slowdown warrants intensified efforts to restore the growth momentum,” the policy statement said.
“With inflation expected to remain below target in the remaining period of 2019-20 and Q1:2020-21, there is policy space to address these growth concerns by reinvigorating domestic demand within the flexible inflation targeting mandate.”
“It is in this context that the MPC decided to continue with an accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.”