RBI cuts repo rate by 25 basis points to 6.25%

RBI cuts repo rate by 25 basis points to 6.25%

The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to reduce the key policy rate or the repo rate by 25 bps to 6.25% in the last bimonthly policy review of 2018-19 while changing the policy stance to ‘neutral’ from ‘calibrated tightening’.

The RBI has revised the projection for CPI inflation downward.

The rate cut is in line with expectations as retail inflation grew by 2.2% in December its slowest in in the last 18 months. While the decision to change the policy stance was unanimous, four out of six members voted for a rate cut while two opted for status quo. This was the first policy under the new Governor Shaktikanta Das.

The Central bank changes its policy stance from ‘calibrated tightening’ to ‘neutral’

While reducing the interest rate, the Central bank said headline inflation is projected to remain soft in the near term reflecting the current low level of inflation and the benign food inflation outlook.

“Continuing deflation in food items, a sharp fall in fuel inflation and some edging down of inflation excluding food and fuel contributed to the decline in headline inflation,” the RBI said.

Observing that actual inflation in the third quarter of 2018-19 was marginally lower than what was projected, the RBI said, “There have been downward revisions in inflation projections during the course of the year, reflecting mainly the unprecedented soft inflation recorded across food sub-groups.”

Going ahead, the RBI said, the short-term outlook for food inflation appears particularly benign, despite adverse base effects.

The RBI has revised the projection for Consumer Price Index (CPI) inflation downward. “Taking into consideration these developments and assuming a normal monsoon in 2019, the path of CPI inflation is revised downwards to 2.8% in Q4:2018-19, 3.2-3.4% in H1:2019-20 and 3.9% in Q3:2019-20, with risks broadly balanced around the central trajectory,” it said.

GDP growth for 2019-20 is projected at 7.4% — in the range of 7.2-7.4% in H1, and 7.5% in Q3 — with risks evenly balanced.


India’s Q4 GDP grows at 7.7%

India’s Q4 GDP grows at 7.7%, touches 6.7% for entire 2017-18 

Showing signs of fully coming out of the shadows of demonetisation and Goods and Services Tax (GST), India’s Q4 GDP  of 2017-18 grew at 7.7 per cent, while for the full financial year 2017-18 it touched 6.7 per cent, official data showed here on Thursday.

India's Q4 GDPThe GDP growth during the third quarter of the fiscal was at 7 per cent. “GDP growth has been increasing continuously every quarter with growth of 7.7 per cent in Q4 of 2017-18. Shows that the economy is on the right track & set for even higher growth in the future. This is the Sahi Vikas under leadership of PM Narendra Modi & @ Arun Jaitley,” Finance Minister Piyush Goyal said via Twitter.

“GDP at 2011-12 prices in the fourth quarter (Q4) of financial year 2017-18 registered growth rate of 7.7 per cent as against 5.6 per cent , 6.3 per cent and 7 per cent respectively, in the first three quarters, Q1, Q2 and Q3 of 2017-18, a statement by Ministry of Statistics and Programme Implementation said.

Rapid growth in agriculture (4.5 per cent), manufacturing (9.1 per cent) and construction sectors (11.5 per cent) contributed to the overall growth of the GDP, the statement added.

“Q4 was expected to be good and that is reflected in the numbers. Rise in manufacturing and construction sectors indicated turnaround in the growth story, which will provide further boost to the economy going forward,” Economic Affairs Secretary Subhash Chandra Garg told reporters at a press meet while decoding the GDP numbers.

Asked about recent GDP growth downgrading by Moody’s from 7.5 per cent to 7.3 per cent, he said the government would not revise GDP estimate of FY19, which is at 7.5 per cent.

Chief Economic Adviser Arvind Subramanian, who also present at the press meet, said “the impact of GST is behind us.”

At the sectoral level, the growth rate of gross value added (GVA) in Q4 of 2017-18 for agriculture and allied sectors, industry and services sectors was estimated at 4.5 per cent, 8.8 per cent, and 7.7 per cent, respectively.

GVA includes taxes but excludes subsidies.

The statement said the sectors which registered growth rate of over 7 per cent are ‘public administration, defence and other services’ (10 per cent), ‘ trade, hotels, transport, communication and services related to broadcasting’ (8 per cent) and ‘electricity, gas, water supply & other utility services’ (7.2 per cent).

The growth in the ‘agriculture, forestry and fishing’, ‘mining & quarrying’, ‘manufacturing’, ‘construction’, and ‘financial, real estate and professional services’ is estimated to be 3.4 per cent, 2.9 per cent, 5.7 per cent , 5.7 per cent and 6.6 per cent, respectively, the statement said.

It said: “The Gross National Income (GNI) at 2011-12 prices is now estimated at Rs 128.64 lakh crore during 2017-18, as against the previous year’s estimate of Rs 120.52 lakh crore. In terms of growth rates, the Gross National Income is estimated to have risen by 6.7 per cent during 2017-18, in comparison to the growth rate of 7.1 per cent in 2016-17.”

The per capita income in real terms (at 2011-12 prices) during 2017-18 is estimated to have attained a level of Rs 86,668 as compared to Rs 82,229 for the year 2016-17. The growth rate in per capita income is estimated at 5.4 per cent during 2017-18, as against 5.7 per cent in the previous year.

Reacting to the GDP numbers, secretary general of Assocham, D.S. Rawat, said: “While Indian economy is in cyclical recovery led by both investment and consumption, however, higher oil prices and tighter financial conditions will weigh in on the pace of acceleration.”

“As India imports over two-thirds of its crude requirement, any surge in crude prices has the potential to upset growth projection,” he added.

– IANS |01 June 2018 |  New Delhi