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06-Dec2018

RBI retains GDP growth forecast at 7.4% for FY19

The Reserve Bank of India (RBI) retaining its Gross Domestic Product (GDP) growth forecast of 7.4% for the current fiscal year (FY19) has said that the India's economic growth will accelerate further to 7.5% in the first half of next fiscal year (H1FY20), on the back of acceleration in investment activity. It added that the GDP growth in April-September period of FY19 has been broadly in line with RBI projection of 7.4% for full fiscal. Besides, the country's economic growth fell to 7.1% in the July-September of the current fiscal, from 8.2% in the April-June period.

Stating that acceleration in investment activity bodes well for the medium-term growth potential of the economy, the RBI called for strengthening of macroeconomic fundamentals. It also said that the time is apposite to further strengthen domestic macroeconomic fundamentals. In this context, fiscal discipline is critical to create space for and crowd in private investment activity. It further said credit offtake from the banking sector has continued to strengthen even as global financial conditions have tightened. FDI flows could also increase with the improving prospects of the external sector.

The Central Bank said going forward lower rabi sowing may adversely affect agriculture and hence rural demand. Financial market volatility, slowing global demand and rising trade tensions pose negative risk to exports. However, on the positive side, it noted that the decline in crude oil prices is expected to boost India's growth prospects by improving corporate earnings and raising private consumption through higher disposable incomes. The price of Indian basket of crude oil fell below $60 to a barrel by end November, from $85 to a barrel in early October.


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