The April-September 2020 GDP growth is seen in the range of 5.5-6 percent, and the October-December 2020 GDP growth is seen at 6.2 percent
The Reserve Bank of India (RBI) has stated FY21 gross domestic product (GDP) growth is projected at 6 percent, in the range of 5.5-6 percent in the first half of FY21 and 6.2 per cent in Q3FY21. The Monetary Policy Committee (MPC) unveiled its last credit policy for FY20 on February 6.
The April-September 2020 GDP growth is seen in the range of 5.5-6 percent, and the October-December 2020 GDP growth is seen at 6.2 percent.
The central bank had in December projected GDP growth for the second half of FY20 at 4.9-5.5 percent, and the first half of FY21 at 5.9-6.3 percent.
The MPC has thus pegged it at the lower end of the GDP growth estimate of the Economic Survey, which estimated 6-6.5 percent GDP growth during FY21. It stated that the growth outlook will be influenced by several factors.
The MPC expects private consumption, particularly in rural areas to recover on the back of improved rabi prospects. "The recent rise in food prices has shifted the terms of trade in favour of agriculture, which will support rural incomes," the policy statement read.
It also expects the easing of global trade uncertainties to encourage exports and spur investment activity, but ceded that the breakout of the coronavirus may, however, impact tourist arrivals and global trade.
"Monetary transmission in terms of a reduction in lending rates and financial flows to the commercial sector has progressed vis-à-vis the last policy, and this could spur both consumption and investment demand," it added.
The MPC also noted that rationalisation of personal income tax rates in the Union Budget 2020-21 should support domestic demand along with measures to boost rural and infrastructure spending.
"Taking into consideration the above factors, GDP growth for FY21 is projected at at 6 percent, in the range of 5.5-6 percent in the first half of FY21 and 6.2 per cent in Q3FY21," it said.
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"On the basis of an assessment of the current and evolving macroeconomic situation, the MPC decided to: keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15 per cent. Consequently, the reverse repo rate under the LAF remains unchanged at 4.90 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 5.40 per cent," the statement read.
Full text of the MPC statement
The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth while ensuring that inflation remains within the target.
"These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth," it added.
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