Mumbai: The Reserve Bank of India (RBI) on Friday sharply cut the economic growth forecast for FY 2019-20 by a whopping 1.1 per cent to five per cent from the projection it made in the monetary policy just two months ago. But it kept lending rates unchanged.
Over the 11 months since February, the RBI has cut its GDP forecast by a massive 2.4 per cent. In its February policy, the RBI had forecast GDP growth at 7.4 per cent, wh-ich was revised down to 7.2 per cent in April. Then in June, the central bank lowered it to 7 per cent, 6.9 per cent in August, and 6.1 per cent in October policy. It slashed the forecast to five per cent now.
The policy repo rate (at which commercial banks borrow from the RBI) since February was cut in every policy, cumulatively easing by 1.35 per cent or by 135 basis points to 5.15 per cent.
In its fifth bi-monthly monetary policy, the RBI’s six-member Monet-ary Policy Committee (MPC) stumped the market as it unanimously voted to keep rates uncha-nged, triggered by the recent spike in inflation.
The stock and the bond markets were expecting a cut by 25 basis points. The MPC acknowledged that there was space for monetary policy action in the future. Economists expect Consumer Price Inflation to soften in the next two to three months, reopening the space for further monetary easing in H1 2020.