RBI drastically reduces the projection of GDP growth to 5% for the current fiscal
MUMBAI: On Thursday, the Reserve Bank of India (RBI) drastically reduced the growth forecast for the current fiscal year to 5 percent from the previous estimate of 6.1 percent due to weak internal and external demand.
India's economic growth according to government data has fallen to a minimum of more than six years from 4.5 percent in the second quarter of the current tax due mainly to the contraction in manufacturing sector production.
Real GDP growth for 2019-20 is revised downward from 6.1 percent in October policy to 5.0 percent, 4.9-5.5 percent in H2 (this fiscal) and 5, 9-6.3 percent for H1 (2020-21). RBI said in its fifth bi-monthly review of monetary policy.
While the improvement of monetary transmission and a rapid resolution of world trade tensions are possible advantages for growth projections, a delay in the reactivation of domestic demand, a greater slowdown in world economic activity and geopolitical tensions are risks down, he said.
However, on the positive side, he said, monetary policy has been relaxing since February 2019, and the measures initiated by the government in recent months are expected to revive sentiment and stimulate domestic demand.
The rate adjustment Monetary Policy Committee (MPC) noted that economic activity has weakened further and the product gap remains negative.
However, several measures already initiated by the government and the monetary relaxation undertaken by the Reserve Bank since February 2019 are expected to gradually feed the real economy, he said.
Data on corporate finance and on projects approved by banks and financial institutions suggest some early signs of recovery in investment activity, although their sustainability must be closely monitored. The need at this time is to address the impediments, which are holding back investments. He said.