RBI Sharply Lowers India’s GDP Growth Forecast For 2019-20
A delay in revival of domestic demand, global slowdown and geopolitical tensions are downside risks to India GDP growth, RBI says.
The Reserve Bank of India has sharply lowered India’s GDP growth forecast for 2019-20 to 5 percent from 6.1 percent on account of a continued consumption slowdown in the country.
India's economic growth, according to government data, slipped to an over-six-year low of 4.5 percent in the second quarter of the current fiscal due to contraction in manufacturing sector output.
"Real GDP growth for 2019-20 is revised downwards from 6.1 percent in the October policy to 5.0 percent, 4.9-5.5 percent in H2 (second half) (this fiscal) and 5.9-6.3 percent for H1 (2020-21)," RBI said in its December 2019 monetary policy review.
While improved monetary policy transmission and a quick resolution of global trade tensions are possible upsides to GDP growth forecasts, a delay in revival of domestic demand, a further slowdown in global economic activity and geopolitical tensions are downside risks, the central bank said.
On the positive side, monetary policy easing since February 2019 and measures taken by the government over the last few months are expected to revive sentiment and spur domestic demand.
The Monetary Policy Committee noted that economic activity has weakened further and the output gap remains negative. But benefits accruing from the recent economic reforms are expected to gradually feed into the real economy, the MPC said.
"Data on corporate finance and on projects sanctioned by banks and financial institutions suggest some early signs of recovery in investment activity, though its sustainability needs to be watched closely. The need at this juncture is to address impediments, which are holding back investments," the MPC said.