Reserve Bank of India slashes GDP forecast, Sensex falls
Economic growth has slumped to a six-year low of five per cent in April-June with no substantial uptick in the following quarter.
Mumbai: The Reserve Bank of India again cut its GDP growth forecast sharply by 80 basis points to 6.1 per cent from 6.9 per cent, owing to weakening of both domestic and external demand conditions.
Economic growth has slumped to a six-year low of five per cent in April-June with no substantial uptick in the following quarter. In the last four policies, including this one, the RBI has cumulatively cut its growth forecast by 130 basis points.
The RBI also projected retail Consumer Price Index inflation for the second quarter of the financial year 2020 at 3.4 per cent (earlier 3.1 per cent) and 3.5-3.7 per cent in the second half. There are risks related to volatile crude oil prices, elevated vegetable prices and volatility in financial markets.
After this, the Bombay Stock Exchange (BSE) Sensex plummeted by 434 points, despite a 25 basis point cut in the key policy rate by the RBI. Rate-sensitive stocks like bank, auto and realty fell by up to five per cent on Friday.
New home, auto and personal loan borrowers are likely benefit from the RBI’s Monetary Policy Committee decision to cut the repo rate by 25 basis points. The repo stands at 5.15 per cent, after the fifth cut in a row, taking the rate to a nine-year low. It may fall further.