Slowing Down Of Domestic Demand Reflected In Significant Moderation In Core CPI inflation

Slowing down of domestic demand is reflected in significant moderation in core CPI inflation and domestic economic activity has shown signs of further weakening, Reserve Bank Of India governor Shaktikanta Das stated in the last monetary policy meeting. According to the minutes of the eighteenth meeting of the Monetary Policy Committee held during August 5-7, 2019, the RBI chief stated that several high frequency indicators have either slowed down or contracted in recent months. Headline CPI inflation has evolved broadly along the projected lines; CPI inflation excluding food and fuel continued to soften, while food inflation has edged up. Global economic activity has been losing pace, weighed down by intensifying trade tensions and geo-political uncertainty. GDP numbers for Q2:2019 in respect of some major advanced and emerging market economies have been subdued. Central banks in both advanced and emerging market economies have been increasingly resorting to more accommodative stances of monetary policy.

He further noted that overall there is clear evidence of domestic demand slowing down further. Investment activity has been losing traction. The weakening of the global economy in the face of intensifying trade and geo-political tensions has severely impacted India's exports, which may further impact investment activity, going forward. Private consumption, which has been the mainstay of domestic demand, has also decelerated. The slowing down of domestic demand is also reflected in significant moderation in CPI inflation excluding food and fuel; and contraction in merchandise imports.

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