RBI to cut interest rate for sixth time over concerns of falling GDP

By IndianMandarins- 05 Dec 2019


To arrest declining GDP, the RBI is expected to make sixth straight rate cut shrugging off a spike in inflation as it stays doggedly focused on supporting economic growth. The RBI has cut borrowing costs by 135 basis points so far in 2019 to a nine-year low of 5.15 per cent.

Meeting of the six-member Monetary Policy Committee led by RBI Governor Shaktikanta Das comes amid deepening concerns about growth, financial stability and weak public finances.

The RBI has lowered its growth forecast for the current fiscal year four times already, with the latest revision in October pegging expansion at 6.1%. Data since then has shown gross domestic product expansion slowing to 4.5% in the July to September period, the weakest pace in more than six years.

The July-September period saw economic slack deepen, with manufacturing contracting. A purchasing managers survey indicated that activity in the dominant services industry slowed during that period. With surveys for both manufacturing and services in November pointing to a rebound, it’s worth watching if and by how much the RBI will further lower its growth forecast.

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