NEW DELHI: RBI has raised its inflation estimate for the first and second half of 2019-20 and cut the economic growth forecast for the current financial year due to weakening demand and investment. The central bank’s monetary policy committee (MPC) cut the growth estimate to 7% for 2019-20, down from previous 7.2%. This is in line with the government’s estimates.

“Weak global demand due to escalation in trade war may further impact India’s exports and investment activity. Further, private consumption, especially in rural areas, has weakened in recent months. However, on the positive side, political stability, high capacity utilisation, the uptick in business expectations in the second quarter, buoyant stock market conditions and higher financial flows to the commercial sector augur well for investment activity,” the MPC said. RBI revised upwards estimate for retail inflation to 3.0- 3.1% for the first half of 2019-20 and to 3.4-3.7% for the second half of 2019-20. It still remains below the central bank’s comfort level.



RBI took note of summer pick-up in vegetable prices, which has been sharper than expected, though this may be accompanied by a correspondingly larger reversal during autumn and winter.