RBI pegs GDP growth rate at 7.4 pc

The Reserve Bank of India (RBI) on Wednesday pegged India's gross domestic product (GDP) growth rate for the financial year 2018-19 at 7.4 per cent and 7.2 per cent in H2.

"Based on an overall assessment, GDP growth for 2018-19 has been projected at 7.4 per cent (7.2-7.3 per cent in H2) as in the October policy, and for H1:2019-20 at 7.5 per cent, with risks somewhat to the downside," said the RBI in a statement after the bi-monthly meeting of the Monetary Policy Committee (MPC).

In view of the current and evolving macroeconomic situation in the country, the RBI has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent.

According to RBI, the lower 'rabi' sowing may adversely affect agriculture and hence rural demand. Financial market volatility, slowing global demand, and rising trade tensions pose a negative risk to exports.

"However, on the positive side, 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. Increased capacity utilisation in the manufacturing sector also portends well for new capacity additions," added the Central bank in the statement.

"There has been significant acceleration in investment activity and high-frequency indicators suggest that it is likely to be sustained. Credit off-take 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 demand outlook as reported by firms polled in the Reserve Bank's IOS has improved in Q4," stated the RBI in the statement.