Free Press Journal

Monetary Policy: RBI expects GDP growth in FY19 from 7.4 to 7.9%


Mumbai: The Reserve Bank of India (RBI) on Thursday estimated that the real Gross Domestic Product (GDP) growth for FY19 will range from 7.4 to 7.9 percent.

The central bank’s six-member Monetary Policy Committee (MPC) in its bi-monthly Monetary Policy Statement, noted that the April-June GDP growth is seen at 7.1 percent, and the July-September GDP growth is seen at 7.4 percent. Further, the real GDP growth in FY19 is seen at 7.4 percent as against 6.6 percent in FY18.

The apex bank also maintained that the Consumer Price Index (CPI) inflation forecast for the second half of FY19 is cut to 4.4 percent from 4.5 – 4.6 percent. Meanwhile, the CPI inflation forecast for the first half of FY19 is cut to 4.7 – 5.1 percent from 5.1 – 5.6 percent.

“CPI inflation has eased to 4.4 percent in February and excluding the estimated impact of increase or adjustment in the house rent allowances for central government employees under the seventh Central Pay Commission, it is estimated at an even lower 4.1 percent,” said RBI Governor Urjit Patel.

Patel added that the aggregate demand is expected to strengthen this year.

“Aggregate demand is expected to strengthen during the course of 2018-19. Normal monsoon and effective food supply management was seen as mitigating factors. Overall the MPC assessed risks to inflation is tilted to the upside,” he said.

He, however, maintained that external demand could be hit owing to crude oil prices and global trade wars.

“On the growth outlook, the MPC was of the view that the pace of economic activity could accelerate in 2018 -19, on clearer signs of revival in investment activity, and sustained improvement in global demand. On the flip side, external demand could be adversely impacted should crude oil prices persist at elevated levels or even increase and trade protectionism intensify,” he concluded.

CPI inflation forecast for the second half of FY19 is cut to 4.4 percent from 4.5 – 4.6 percent. The same for January to March 2019 is seen at 4.4 percent, with upside risks, the bank said. CPI inflation for April to September is seen at 4.7 – 5.1 percent, and 4.4 percent for October to March. The RBI kept the repo rate and reverse repo rate unchanged at 6 percent and 5.75 percent respectively.