New Delhi: Owing to prevailing weak domestic demand conditions and subdued private investment, Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) today sharply reduced India’s GDP growth projection to 6.1% from 6.9% estimated in the August credit policy.
“Various high frequency indicators suggest that domestic demand conditions have remained weak. The business expectations index of the Reserve Bank’s industrial outlook survey shows muted expansion in demand conditions in Q3," according to the MPC statement.
The committee said various measures recently announced by the government are likely to strengthen private consumption and spur investment activity, intensified efforts will still be required to restore growth momentum. The government had in September reduced corporate tax rate to 22% from 30%.
“With inflation expected to remain below target in the remaining period of 2019-20, there is policy space to address these growth concerns by reinvigorating domestic demand within the flexible inflation targeting mandate," the MPC said.
The MPC decided maintaining accommodative stance with a view to revive growth, while ensuring that inflation remains within the medium-term target of 4%. While Consumer Price Index (CPI) inflation estimate for September quarter has been revised slightly upwards to 3.4%, the projection has been retained at 3.5-3.7% for the second half of this financial year.
“On the positive side, however, the impact of monetary policy easing since February 2019 is gradually expected to feed into the real economy and boost demand. Several measures announced by the government over the last two months are expected to revive sentiment and spur domestic demand, especially private consumption," the MPC said.