RBI Estimates GDP Growth to Expand to 6.5% in Coming Six Months

The Reserve Bank of India on Thursday projected the economy to expand by 6 per cent during the next financial year, pegging it at the lower end of the GDP growth estimate of the Economic Survey.

The survey, tabled in Parliament last month, estimated the GDP growth during FY21 at 6-6.5 per cent.

After three-day deliberations, the Monetary Policy Committee (MPC), headed by Reserve Bank of India (RBI) Governor Shaktikanta Das, observed that the economy continues to be weak and the output gap remains negative.

Real GDP growth for 2019-20 was projected at 5 per cent in the December 2019 policy.

The central bank said that for 2020-21, the growth outlook will be influenced by several factors, including level of private consumption, and external factors.

It said private consumption, particularly in rural areas, is expected to recover on the back of improved Rabi crop prospects. The recent rise in food prices has shifted the terms of trade in favour of agriculture, which will support rural incomes.

The easing of global trade uncertainties should encourage exports and spur investment activity, it said.

"The breakout of the coronavirus may, however, impact tourist arrivals and global trade," it added.

Also, the 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 different factors, RBI said "GDP growth for 2020-21 is projected at 6.0 per cent – in the range of 5.5-6.0 per cent in H1 and 6.2 per cent in Q3,"

The government has said the Union Budget presented by Finance Minister Nirmala Sitharaman has a host of steps to spur economic growth, which is estimated to have slowed to a decade-low of 5 per cent in the current fiscal.