RBI Cuts India's Annual Growth Rate From 6.1% To 5%
The Reserve Bank of India – Governor Shaktikanta Das on December 5 heading the monetary policy committee (MPC) decided to cut the real gross domestic product (GDP) for the current fiscal to 5 per cent.
The RBI in October projected GDP growth for 2019-20 at 6.1 per cent.
After the announcement made by the six-member committee, a statement released by the RBI said that GDP growth for the Q2 (second quarter) dropped surprisingly than the projected figure. It said that several indicators have suggested that domestic and external demand conditions continued to remain weak. “Based on the early results, the business expectations index of the Reserve Bank’s industrial outlook survey indicates a marginal pickup in business sentiments in Q4,” the statement read.
The statement also mentioned that improved monetary transmission and quick resolution of global trade tensions could bring up the GDP numbers. However, weak domestic demand and a gradual decline in economic activities along with geopolitical tension deter the growth.
India’s GDP growth for the July-September quarter fell to a 6-year low of 4.5 per cent as households are cutting back on spending and companies are not adding capacity.
The farm sector grew a mere 2.1 per cent in the second quarter of 2019-20, due to the delayed monsoon hampering the summer Kharif crop, India’s main harvest. India’s industrial sector struggled as the production dropped to 4.3 per cent, the lowest in eight-year.
The Central bank also left the repo rate untouched at 5.15 per cent.