The Monetary Policy Committee (MPC) of RBI on February 7 changed its stance from calibrated tightening to neutral and cut the policy rate by 25bps on the back of benign headline retail inflation and slowing global growth. India still remains the fastest growing economy as China’s economy cooled in the December quarter to a 28-year low of 6.4%.
Risks to global growth tilt to the downside, with IMF cutting 2019 growth projection by 20 basis points (bps) to 3.5%. The International Monetary Fund (IMF) last month projected India’s growth at 7.5% in 2019-20 amid slower global expansion.
However, most international agencies project India’s growth to bounce back in the next fiscal year. While the slowdown in the second half (October-March) of this financial year was expected, CSO now estimates it to be sharper than it earlier estimated. This will help the government achieve the fiscal deficit target of 3.3% of GDP for 2018-19 as originally estimated in last year’s budget against the revised estimate of 3.4%. The size of the Indian economy estimated through nominal gross domestic product (GDP) was revised upward to ₹190.54 lakh crore ($2.7 trillion) against ₹188.41 lakh crore ($2.65 trillion). Thus, in the March quarter, the economy is implicitly assumed to decelerate to 6.4%. The data for the first (June) and second (September) quarters were also revised downward to 8% and 7% respectively. The Central Statistics Office (CSO) on Thursday also revised downward its full-year growth forecast for the current fiscal year to 7% from the 7.2% estimated earlier. However, the dismal growth print, the last before the general election due by May, is likely to take some sheen away from the economic record of the Narendra Modi government, which is seeking a second term in office.
According to the statement, GDP growth during 2018-19 is estimated at 7 per cent as compared to 7.2 per cent in 2017-18.(AFP) The Indian economy decelerated at a faster pace than anticipated in the December quarter of 2018-19 to 6.6%-the lowest in five quarters-increasing chances of another round of rate cuts by the Reserve Bank of India (RBI) in April to support growth.
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