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RBI lowers growth forecast to 7% due to slowdown, global trade war

In the April monetary policy, the growth of Gross Domestic Product for 2019-20 was projected at 7.2 per cent - in the range of 6.8-7.1 per cent for the first half of the fiscal and 7.3-7.4 per cent for the second part - with risks evenly balanced.

business Updated: Jun 06, 2019 12:30 IST
Press Trust of India
Press Trust of India
New Delhi
RBI,GDP,Trade war
The Reserve Bank of India Thursday lowered the economic growth forecast for the current fiscal to 7 per cent due to slowdown in domestic activities and escalation in global trade war.(Reuters Photo)

The Reserve Bank of India Thursday lowered the economic growth forecast for the current fiscal to 7 per cent due to slowdown in domestic activities and escalation in global trade war.

In the April monetary policy, the growth of Gross Domestic Product (GDP) for 2019-20 was projected at 7.2 per cent - in the range of 6.8-7.1 per cent for the first half of the fiscal and 7.3-7.4 per cent for the second part - with risks evenly balanced.

Data for January-March quarter:2018-19 indicate that domestic investment activity has weakened and overall demand has been weighed down partly by slowing exports, the RBI said after the meeting of the Monetary Policy Committee (MPC), which decides on key policy rates.

Weak global demand due to escalation in trade wars may further impact India’s exports and investment activity, it added. Further, private consumption, especially in rural areas, has weakened in recent months.

Also read:RBI cuts repo rate by 25 bps for third time in 2019, loans may get cheaper

However, on the positive side, political stability, high capacity utilisation, the uptick in business expectations in the second quarter, buoyant stock market conditions and higher financial flows to the commercial sector augur well for investment activity, the RBI added.

Taking into consideration these factors and the impact of recent policy rate cuts, “GDP growth for 2019-20 is revised downwards from 7.2 per cent in the April policy to 7.0 per cent – in the range of 6.4-6.7 per cent for H1:2019-20 and 7.2-7.5 per cent for H2 – with risks evenly balanced”, said the central bank.

India’s exports were unable to sustain the growth of 11.8 per cent observed in March 2019 and grew by 0.6 per cent in April 2019 dragged down by engineering goods, gems and jewellery, and leather products.

Tariff wars between the US and China has impacted global trade and and financial markets.

As per the Central Statistics Office (CSO), India’s GDP slowed to a five-year low of 5.8 per cent in January-March quarter of 2018-19. The annual growth during the last fiscal at 6.8 per cent too was at a five year low.

(The story has been published from a wire feed without any modifications to the text, only the headline has been changed)

First Published: Jun 06, 2019 12:29 IST