The slowdown in the auto sector is one of the 15 domestic and global considerations underlying the RBI Monetary Policy Committee’s (MPC) decision to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 35 basis points (bps) from 5.75% to 5.4%.

“Tractor and motorcycle sales – indicators of rural demand – continued to contract. Amongst indicators of urban demand, passenger vehicle sales contracted for the eighth consecutive month in June,” the central bank said in a statement. “Commercial vehicle sales slowed down even after adjusting for base effects.”

However, domestic air passenger traffic growth turned positive in June after three consecutive months of contraction, RBI pointed in the statement, adding that high-frequency indicators of services sector activity for May-June thus presented a mixed picture. The services PMI expanded to 53.8 in July from 49.6 in June on an increase in new business activity, new export orders, and employment, it added.

The Reserve Bank further said that construction activity indicators slackened during the June-July period with contraction in cement production and slower growth in finished steel consumption in June.