New Delhi: The Reserve Bank of India (RBI) has cut Gross Domestic Product (GDP) growth estimate for FY2019-20 to 6.1 percent from its earlier forecast of 6.9 percent on Friday. A statement that emerged out of the Monetary Policy Committee (MPC) meeting said, "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 (October-December)."
"Export prospects have been impacted by slowing global growth and continuing trade tensions," the RBI said after the MPC meeting.
In line with what Governor Shaktikanta Das had said at the last MPC meeting, the RBI cut its repo rate by 25 basis points to 5.15 percent to boost the flow of credit and support economic growth. One basis point is a hundredth of a percentage point.
The RBI MPC also decided to continue with an accommodative stance "as long as it is necessary" to revive growth, while ensuring inflation remains within the target.
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The RBI said that it is hoping that consistent lower interest rates since February 2019 will feed into the real economy and spur 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.
The RBI expects GDP to see a slightly better growth at 5.3 percent in the July-September quarter, up from 5.0 percent seen during the April-June quarter. The Central bank also said that it expects the GDP growth in the second half of the current fiscal to be in the range of 6.6-7.2 percent, as against the earlier estimate of 7.3-7.5 percent.