The RBI, in its bi-monthly policy review today, trimmed the repo rate by 35bps to 5.40% with an accommodative stance.
In the MPC’s June resolution, the real GDP growth for 2019-20 is revised downwards from 7% in the June policy to 6.9 percent – in the range of 5.8-6.6% for H1:2019-20 and 7.3-7.5% for H2 – with risks somewhat tilted to the downside; GDP growth for Q1:2020-21 is projected at 7.4%.
The real GDP growth for 2019-20 was projected at 7%– in the range of 6.4-6.7% for H1:2019-20 and 7.2-7.5% for H2 – with risks evenly balanced. Various high-frequency indicators suggest a weakening of both domestic and external demand conditions.
The Business Expectations Index of the Reserve Bank’s industrial outlook survey shows muted expansion in demand conditions in Q2, although a decline in input costs augurs well for growth.
The impact of monetary policy easing since February 2019 is also expected to support economic activity, going forward. Moreover, base effects will turn favorable in H2:2019-20.
These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth, the RBI said in the press note.
The next meeting of the MPC is scheduled during October 1, 3 and 4, 2019.
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