RBI cuts India’s annual GDP forecast by whopping 1.1 pct points in six months; lists these key reasons

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Updated: November 13, 2019 12:15:31 PM

The downward revision in GDP growth forecast reflected both subdued domestic demand conditions and weak consumer sentiments.

rbi, gdp forecast, reserve bank, sbi, state bank of india, slowdown, investment, demandIn a research note, SBI said that the GDP growth may further fall to 4.2% in Q2 FY20. 

As slowdown spreads on all quarters of the economy, RBI has cut down India’s annual GDP forecast by a whopping 1.1 percentage points in six months to September 2019. RBI’s annual GDP forecast for the fiscal year 2019-20 was 7.3 per cent by the March 2019-end, which has been lowered to 6.2 per cent in the first half of the current fiscal year, according to the latest RBI report. “The downward revision in GDP growth forecast reflected both subdued domestic demand conditions and weak consumer sentiments,” said the Reserve Bank. 

Recently, Moody’s cut down India’s credit rating outlook to ‘negative’ from ‘stable’, citing risks to economic growth, prospects of a more entrenched slowdown, weak job creation, and increasing debt. Corroborating the Moody’s forecast, the State Bank of India has also suggested that India’s GDP growth may fall further in the second quarter.

Also Read: SBI hints at more pain ahead for economy; cuts FY20 GDP growth to 5%

In a research note, SBI said that the GDP growth may further fall to 4.2 per cent in the second quarter of the current fiscal year, on the back of low automobile sales, a decline in air traffic movements, flattening of core sector growth and declining investment in construction and infrastructure. 

Amid the continued slowdown in the domestic private consumption, demand, and investment growth, coupled with likely lower global output growth, a six-year low annual GDP growth of 5 per cent in Q1 FY20 and an eight-year low industrial production growth in September 2019, the near-term outlook gives no sign of quick recovery in the momentum of economic growth. 

India’s largest bank, the SBI also expects RBI to announce large rate cuts in the December monetary policy seeing a slowdown in growth. Finance Minister Nirmala Sitharaman has lately announced a slew of measures to boost the economy but those have hardly resulted in the recovery of the momentum so far. 

The article was first published on Tuesday, 12 November 2019, on financialexpress.com

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