Millennium Post

RBI retains GDP projection for FY19 at 7.4%

New Delhi: The Reserve Bank Wednesday retained its GDP forecast for the current fiscal at 7.4 per cent and said growth will accelerate further to 7.5 per cent in first half of 2019-20, driven by acceleration in investment activity.

The central bank said that the GDP growth in April-September of current fiscal has been broadly in line with RBI projection of 7.4 per cent for full fiscal.

Stating that acceleration in investment activity bodes well for the medium-term growth potential of the economy, the RBI called for strengthening of macroeconomic fundamentals.

"The time is apposite to further strengthen domestic macroeconomic fundamentals. In this context, fiscal discipline is critical to create space for and crowd in private investment activity," the RBI said in its fifth bi-monthly monetary policy.

"Based on an overall assessment, GDP growth for 2018-19 has been projected at 7.4 per cent (7.2-7.3 per cent in H2) as in the October policy, and for H12019-20 (April-September) at 7.5 per cent, with risks somewhat to the downside," RBI said.

India's economic growth fell to 7.1 per cent in the second quarter (July-September) of the current fiscal, from 8.2 per cent in the April-June period. The growth was 7.7 per cent in the January-March period.

The Central Bank said going forward, lower rabi sowing may adversely affect agriculture and hence rural demand. Financial market volatility, slowing global demand and rising trade tensions pose negative risk to exports.

However, on the positive side, the decline in crude oil prices is expected to boost India's growth prospects by improving corporate earnings and raising private consumption through higher disposable incomes, the central bank noted.

The price of Indian basket of crude oil fell below $60 to a barrel by end November, from $85 to a barrel in early October.

"There has been significant acceleration in investment activity and high frequency indicators suggest that it is likely to be sustained. Credit offtake from the banking sector has continued to strengthen even as global financial conditions have tightened. FDI flows could also increase with the improving prospects of the external sector," the RBI said.


..lowers inflation projection to 2.7-3.2% for second half

Mumbai: The Reserve Bank Wednesday lowered retail inflation projection in the range of 2.7-3.2 per cent for the second half of the current fiscal, citing normal monsoon and moderate food prices.

The broad-based weakening of food prices imparts downward bias to the headline inflation trajectory going forward, the RBI said in its fifth bi-monthly monetary policy announced here.

Meanwhile, the central bank maintained status quo in monetary policy announcement, leaving the key interest rate unchanged at 6.5 per cent.

In its previous policy review in October, the apex bank had projected the retail inflation to be around 3.9-4.5 per cent in the October-March period of 2018-19.

In contrast to the food prices, there has been a broad-based increase in inflation in non-food groups. International crude oil prices have declined sharply since the last policy and the price of Indian crude basket collapsed to below $60 a barrel by end-November after touching $85 a barrel in early October.

"Taking all these factors into consideration and assuming a normal monsoon in 2019, inflation is projected at 2.7-3.2 per cent in H2 FY2018-19 and 3.8-4.2 per cent in H1 FY2019-20, with risks tilted to the upside," the RBI said.

It said the projected inflation path remains unchanged after adjusting for the HRA impact of central government employees as this impact dissipates completely from December 2018 onwards.

Although recent food inflation prints have surprised on the downside and prices of petroleum products have softened considerably, it is important to monitor their evolution closely and allow heightened short-term uncertainties to be resolved by incoming data, it added."

PTI

PTI

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