RBI's Monetary Policy Committee lowers Growth Domestic Product growth forecast to 7% from 7.2% for FY20
The RBI concerns of a slowdown in the economy, the six-member monetary policy committee (MPC), headed by RBI Governor Shaktikanta Das, on Thursday lowered its GDP growth forecast for FY20 to 7 % from 7.2 %in the April policy. In the first monthly Monetary Policy Statement of the current fiscal, the growth rate was projected in the range of 6.8-7.1 % for the first half of the financial year and 7.3-7.4 % for the second half with risks is equally balanced. The latest June policy rescheduled it downwards to 6.4-6.7 %till September but expected it to pick up the pace too as much as 7.5 %
This comes here on the back of a worrying Q4FY19, which saw the lowest growth rate of 5.8 % in the past five financial years of the growth. "Growth domestic product at Constant (2011-12) Prices in Q4 of 2018-19 has estimated at Rs 37.20 lakh crore, as against Rs 35.15 lakh crore in Q4 of 2017-18, showing a growth rate of 5.8 percent [from 6.6 % in Q3]," the government said in a statement last few weeks.
It means that India lost the tag of the fastest growing major economy in the world to China in the January to March quarter - the neighboring country had posted 6.4 % GDP is in the same period. Commenting on the GDP data, Economic Affairs Secretary SC Garg said the slowdown was due to temporary factors like stress in the NBFC segment. He had added that the economic activity might also remain sluggish during the April-June quarter of the current fiscal before picking up in the subsequent months.
The NSO data of the latest pegs India's GDP estimate for the entire financial year 2018-19 at 6.8 %. That's down by "20 basis points from the second advance estimates released on February 28, pulled down by a downward revision in private final consumption expenditure (PFCE) and moderation in exports," the MPC noted in its latest statement.
The committee also pointed out that the various data indicated that private consumption growth had moderated, gross fixed capital formation growth declined sharply, and domestic investment activity had weakened. "Weak global demand due to escalation in trade wars may further impact India's exports and investment activity," the MPC said, adding, "However, on the positive side, political stability, high capacity utilization, the uptick in business expectations in Q2, buoyant stock market conditions and higher financial flows to the commercial sector augur well for investment activity."