INSUBCONTINENT EXCLUSIVE:
RBI Governor Shaktikanta Das is of the view that continuing economic slowdown requires an all-out effort to strengthen private consumption
The central banker feels the recent measures announced by the government should help create demand in the economy, and drive
panel that private investment has lost traction due to the corporate sector's reluctance to make fresh investment even though capacity
utilisation in the manufacturing sector has operated close to the long-term average in recent times.
He said the government has initiated
investment by creating uncertainty
cut.
RBI slashed the policy repo rate by 25 basis points in the latest review, cumulatively lowering it by 135 basis points in eight months
One MPC member Ravindra H Dholakia voted for 40 basis point rate cut, while other five including Das, Chetan Ghate, Pami Dua, Michael
long as it is necessary to revive growth, while ensuring that inflation remains within the target
said.
He said systemic liquidity has been in surplus since June 2019 and the introduction of lending rates linked to an external benchmark
should result in better monetary transmission.
Making his case for a 40 basis points rate cut, Dholakia said external benchmarking of the
lending rates by the banks would result in better transmission now
Corporate bond market reforms by allowing entry to corporates with lower rating than AAA, encouraging issuance of long term bonds and
creating a proper yield curve for the government bond market to serve as a benchmark can go a long way to deepen the market and improve the
Enough space exists for a 40 bps reduction in the policy repo rate now with space still existing for future till growth recovers
frequency data on indicators for estimating quarterly growth suggest that growth slowdown may continue in the second quarter of 2019-20
Any substantial recovery is likely only in the Q3 of 2019-20
This is because, the impact of corporate tax cut particularly for the new enterprises and good monsoon will be kicking off from the third
review, economic activity has continued to weaken.
2) External demand conditions have worsened
Geopolitical risks remain unresolved
There has been a resurgence of trade policy tensions, and global growth has continued to weaken
Exports contracted in Q1 FY19:20.
3) Domestically, sentiment remains weak.
4) Consumer confidence fell for the 3rd consecutive round.
5) The
Business Expectation Index (BEI) also dipped
However, sales growth remained steady for the non-IT services sector
Weak sentiments may become self-fulfilling, which will complicate the job of monetary policy.
Pami Dua1) Private consumption and investment
activity are weak, and business and consumer sentiment are somewhat downbeat.
2) Given the slowdown in growth on the domestic and global
fronts, along with benign headline inflation and the expectation that it will remain below target, there is policy space to further cut the
policy repo rate to boost domestic growth, within the flexible inflation targeting mandate.
Michael Debabrata Patra1) Inflation continues to
trail below target and is projected to remain so over the 12 months ahead horizon.
2) The outlook is fraught with downside risks, but the
for reviving spending.
Bibhu Prasad Kanungo1) The slowdown of GDP growth in the recent period has been underpinned by deficient domestic
The recent measures initiated by the government should be helpful in supporting domestic demand, especially investment.
2) While the impact
of past policy rate cuts by the MPC is expected to transmit to the real sector gradually, there is a need to reinforce the past monetary
policy measures and the recent steps taken by the government in supporting domestic demand
As inflation is projected to remain below the target of 4 per cent till the first quarter of 2020-21, policy space is available to support
