RBI lowers growth forecast, leaves key rates unchanged

MUMBAI: The Reserve Bank of India on Thursday left key rates unchanged even as it lowered India’s GDP growth forecast to 5 per cent from the current 6.1 per cent.

RBI lowers growth forecast, leaves key rates unchanged

The central bank also revised GDP growth downwards to 5 per cent for 2019-20 from the 6.1 per cent projected in its October policy.

rchopra@tribunemail.com

Shiv Kumar
Tribune News Service
Mumbai, December 5

The Reserve Bank of India on Thursday left key rates unchanged even as it lowered India’s GDP growth forecast to 5 per cent from the current 6.1 per cent.

In its statement, it said that it decided to keep the repo rate and reverse repo rates unchanged at 5.15 per cent and 4.9 per cent, respectively.

The Monetary Policy Committee (MPC) of the RBI said it was maintaining an “accomodative” stance which had been interpreted by analysts as over-ruling chances of rates being increased in the coming months.

“The MPC recognises that there is monetary policy space for future action. However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture. Accordingly, the MPC decided to keep the policy repo rate unchanged and continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target,” the RBI said in a statement.

The Central Bank also revised upwards its consumer price index inflation projection to 5.1-4.7 per cent for the second half of the current financial year and to 4-3.8 per cent for the first half of 2020-21. “Domestic demand has slowed down, which is being reflected in the softening of inflation excluding food and fuel,” the RBI added.

The statement noted that the real GDP growth projected in the October policy was at 6.1 per cent for 2019-20. However, actual “GDP growth for Q2:2019-20 turned out to be significantly lower than projected,” the RBI added. Projections for the second half of the current financial year has been lowered downwards to 4.9 to 5.5 per cent.

The RBI, however, hoped the measures initiated by the government over the past few months would spur domestic demand.

Later, RBI Governor Shaktikanta Das told reporters that globally growth appeared to have become subdued though there were some signs of resilience. He was hopeful that rabi-sowing appeared to be good despite the delay in harvesting the kharif crop.

“The slowdown in GDP growth was cushioned by a jump in government final consumption expenditure. On the supply side gross value added (GVA) growth decelerated to 4.3 per cent in Q2 ’19-20, pulled down by contraction in manufacturing. Growth in the services sector moderated but agricultural GVA growth increased marginally. Beyond Q2 there are several positive developments which could turn out to be green shoots depending on how they evolve,” Das added.

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