Admitting slowdown, RBI lowers growth forecast to 6.9%

With the headwinds to growth rising from all around, Reserve Bank governor Shaktikanta Das Wednesday admitted the economy is in a slowdown mode, but termed it as cyclical and not structural one, and exuded confidence growth will pick up the momentum fast.

The admission of the rising headwinds to growth led the monetary authority to slash the lending rates by an unprecedented 35 bps to 5.40 percent in the fourth successive rate reductions since he assumed power in December.

None of the macro-indicators have been promising since the past many months-plunging auto sales which hit a 20-year low in July, plummeting IIP growth which hit a 57-month low in June, falling exports and the continuing bloodbath in the markets, coupled with trade wars and increasing challenges to global economy all point to the gathering clouds.

The statement also comes amid many key personalities, including engineering giant Larsen & Toubro chairman AM Naik expressing concerns on the growth front.

"Our understanding is that at this point, it is perhaps a cyclical slowdown, not really a deep structural one. Nonetheless, we have to recognise that there is room for certain structural reforms to be undertaken," Das told reporters at the customary post-policy presser.

He, however, exuded confidence that growth numbers will move up faster going ahead driven by the measures being taken by the government and the central bank, and partly due to the base effect.

Based on his interactions, Das said the government is planning more measures to revive growth, and also pointed out to finance minister Nirmala Sitharaman's statements on sector-specific booster doses on the anvil.

Attributing the slowdown to both demand as well as investment slowdown, Das said, "both demand and investment put together are having a dampening effect on growth."