Growth revival highest priority in FY20: RBI annual report

Mumbai: The Reserve Bank of India on Thursday reiterated that reviving consumption demand and private investment have assumed the highest priority in 2019-20, a sign that more rate cuts could be on the anvil.

“Strengthening the banking and non-banking sectors, a big push for spending on infrastructure and implementation of much needed structural reforms in the areas of labour laws, taxation and other legal reforms, which will also enhance ease of doing business in pursuit of fulfilling the vision of India becoming a $5 trillion economy by 2024-25,” the RBI said in its annual report.

Several indicators of aggregate demand moderated in the first quarter of 2019-20. Delayed onset and skewed distribution of south-west monsoon could pose downside risks to crop production and rural consumption demand, as evident in the sharp contraction in the sale of motorcycles and tractors, the report said.

The external sector looks vulnerable with the macroeconomic environment remaining unsettled, financial markets experiencing considerable flux and uncertainty surrounding crude oil prices. The IMF expects global growth to slow down to 3.2% in 2019, from 3.6% in the previous year. Central banks are also gearing up to become increasingly accommodative. “This has stoked apprehensions that the global economy may be weakening more than what the headline numbers suggest,” according to the report.

The central bank projected India's GDP growth for FY20 at 6.9%– in the range of 5.8-6.6% for H1 2019-20 and 7.3-7.5% for H2.

Inflation outlook remained benign and the recent catch-up in the progress of monsoon and khariff sowing eased inflation concerns from the delayed onset of monsoon.

Also read: How a deficient monsoon impacts the economy

The path of CPI inflation is now projected at 3.1% for the second quarter of FY20 and 3.5-3.7% for the second half of FY20, with risks evenly balanced. Consumer price index (CPI)-based inflation for the first quarter of FY21 is projected at 3.6%.