The Reserve Bank on Wednesday retained the GDP forecast for the current fiscal at 7.4 per cent on robust corporate earnings and buoyant rural demand, though it flagged global trade tensions for Indian exports.
In the third bi-monthly monetary policy statement for 2018-19, RBI said various indicators suggest that economic activity has continued to be strong.
The statement issued after three-day meeting of the Monetary Policy Committee (MPC) noted that the progress of the monsoon so far and a sharper than the usual increase in MSPs of kharif crops are expected to boost rural demand by raising farmers’ income.
“Robust corporate earnings, especially of fast moving consumer goods (FMCG) companies, also reflect buoyant rural demand,” the central bank said, adding that investment activity remains firm even as there has been some tightening of financing conditions in the recent period.
Based on an overall assessment, the Reserve Bank of India said that the Gross Domestic Product (GDP) growth projection for 2018-19 is retained, as in the June statement, at 7.4 per cent.
As per the RBI, the growth would be in the range of 7.5-7.6 per cent in first half of the fiscal and 7.3-7.4 per cent in October-March 2018-19 period “with risks evenly balanced”.
The central has also projected the GDP growth for first quarter of the next financial year at 2019-20 at 7.5 per cent.
The monetary policy statement further said that increased FDI flows in recent months and continued buoyant domestic capital market conditions bode well for investment activity.
The central bank said that activity in the manufacturing sector is expected to remain robust in Q2, though there may be some moderation in pace.
Rising trade tensions may, however, have an adverse impact on India’s exports.