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More measures, transmission expected to prop-up growth: RBI Oct MPR

More measures, transmission expected to prop-up growth: RBI Oct MPR

Mumbai, Oct 12 (SocialNews.XYZ) Government measures to boost growth along with faster resolution of stressed assets, and further transmission of past monetary policy easing are expected to accelerate the country's economic growth the coming quarters, the Reserve Bank of India said.

According to RBI's Monetary Policy Report, October 2019: "Taking into account the baseline assumptions, survey indicators, the reductions in the policy repo rate since February 2019, the base effects and model forecasts, real GDP growth is projected at 6.1 per cent in 2019-20 - 5.3 per cent in Q2, 6.6 per cent in Q3, 7.2 per cent in Q4 - with risks evenly balanced."

"For 2020-21, the structural model estimates indicate real GDP growth at 7.0 per cent - quarterly growth rates in the range of 6.5-7.4 per cent - assuming a normal monsoon, and no major exogenous or policy shocks."

 

Taking note of the slowdown, Centre announced various policy reforms on foreign direct investment (FDI), upfront release of funds for recapitalisation of public sector banks (PSBs), merger of PSBs, incentives for exports and real estate, reduction in the corporate income tax rate.

Lately, domestic economic activity turned out to be weaker in "H1:2019-20 vis-?-vis projections in the April 2019 MPR in an environment of global headwinds".

"The expected pick-up in both private consumption and investment failed to materialise, and exports lost momentum under the weight of the slump in world trade," the MPR said.

"Although the south-west monsoon turned out to be above long period average, its uneven progress - both temporal and spatial - could impinge upon the prospects for agriculture."

Consequently, the real GDP growth fell to a 25-quarter low in Q1, 2019-20 on weak private consumption and investment and high frequency indicators for Q2 point to a slowdown in the various constituents of aggregate demand deepening.

RBI also reduced the country's economic growth forecast to 6.1 per cent for 2019-20 from 6.9 per cent.

It said that continuing slowdown "warrants intensified efforts to restore the growth momentum" and 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".

In this context, 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 and also maintained its accommodative stance.

This led a slew of forecasters to cut India's growth projects.

On Thursday, India Ratings and Research (Ind-Ra) slashed the country's gross domestic product forecast for 2019-20 to 6.1 per cent for the second time in two months.

Ind-Ra had earlier revised its GDP growth estimate to 6.7 per cent from its earlier forecast of 7.3 per cent in August.

Similarly, US rating multinational Moodys Investor Services reduced its 2019-20 growth forecast for India to 5.8 per cent, from its earlier 6.8 per cent, saying the economy was experiencing a pronounced slowdown on account of multiple, domestic and long-lasting factors.

"While we expect a moderate pick-up in real GDP growth and inflation over the next two years supported by monetary and fiscal stimulus, we have revised down our projections for both, a Moody's report said.

"We forecast real GDP growth to decline to 5.8 per cent in the fiscal year ending March 2020 (fiscal 2019) from 6.8 per cent in fiscal 2018, and to pick up to 6.6 per cent in fiscal 2020 and around 7.0 per cent over the medium term. Compared with only two years ago, the probability of sustained real GDP growth at or above 8 per cent has significantly diminished," it said.

Source: IANS

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More measures, transmission expected to prop-up growth: RBI Oct MPR

About Gopi Adusumilli

Gopi Adusumilli is a Programmer. He is the editor of SocialNews.XYZ and President of AGK Fire Inc. He enjoys designing websites, developing mobile applications and publishing news articles on current events from various authenticated news sources. When it comes to writing he likes to write about current world politics and Indian Movies. His future plans include developing SocialNews.XYZ into a News website that has no bias or judgment towards any. He can be reached at gopi@socialnews.xyz

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