RBI lowers 2019-20 GDP growth forecast to 7.2 per cent

RBI has lowered its GDP growth forecast from 7.4 per cent to 7.2 per cent for the current fiscal (2019-20) due to uncertain global financial outlook.

“Taking into account the baseline assumptions, survey indicators, the cut in the policy repo rate in the February 2019 policy and model forecasts, real GDP growth is projected to improve from 7 per cent in 2018-19 to 7.2 per cent in 2019-20 – 6.8 per cent in Q1, 7.1 per cent in Q2, 7.3 per cent in Q3, and 7.4 per cent in Q4 – with risks evenly balanced around this baseline path,” the RBI Monetary Policy Committee report stated on Thursday.

It further added, for 2020-21, the structural model estimates indicate real GDP growth at 7.4 per cent, with quarterly growth rates in the range of 7.3- 7.5 per cent, assuming a normal monsoon, and no major exogenous or policy shocks.

The report noted that there could be headwinds from greater than expected moderation in global growth and global trade as well as unanticipated volatility in global financial markets.

It said, there are upside as well as downside risks to the baseline growth scenario. The boost to private investment activity from faster resolution of stressed assets and increased as well as more broad-based credit offtake amidst rising capacity utilisation can raise the baseline growth projection.

Conversely, further escalation of trade tensions and protectionist trends, increased volatility in global financial conditions over the uncertainty of the stance of monetary policy in the US and other advanced economies, uncertainty surrounding Brexit, a sharper slowdown in the Chinese economy and deviations of the south-west monsoon from the baseline assumption of a normal monsoon may pose downside risks to the baseline growth path.