NEW DELHI: The Reserve Bank of India (RBI) downgraded the GDP growth projection from 6.1% to 5% for 2019-20 following a meeting of its Monetary Policy Committee (MPC) on Thursday. The GDP growth slowed sharply to more than six-year low of 4.5 per cent in the July-September, hit by a slump in manufacturing output, which contracted by 1.0 per cent. The pace of GDP growth moderated from 5 per cent in April-June and 7 per cent in the July-September quarter of 2018.
Contrary to people's expectations, the RBI also decided to keep the repo rate unchanged. According to the decision taken by the MPC, the RBI decided to keep the repo rate unchanged at 5.15% and the reverse repo rate at 4.90%.
The MPC met today to review the economic situation and suggest measures to boost the struggling economy. Interestingly, no member of the MPC was in favour of further rate cut despite concerns over declining GDP growth rate and a slowing economy.
Ahead of the RBI meet, the investors in the Indian equity market eagerly anticipated the apex bank's move to cut lending rates. There were high expectations that the RBI will go for a rate cut post its monetary policy meet. The top bank slashing the lending rates would have given a major boost to the equity indices, the experts hoped ahead of the MPC meeting.
The resolution of the MPC was placed on the website of the RBI around 11.45 AM. In five reductions in 2019 so far, the repo rate had been lowered by a total of 135 basis points over concerns that growth momentum is slowing down and also to try to boost liquidity in the financial system.
The RBI has cut interest rates on every single occasion the multi-member monetary policy committee has met since Shaktikanta Das took over as the Governor of RBI in last December. The RBI may cut interest rates again to support growth, bankers and experts believe.
A financial market expert added that globally, sentiments have turned positive with US and China inching close towards the trade deal and investors would watch out for further development on that front.
On Wednesday too, reports of the US and China nearing a trade pact helped the indices revive in the last hour of trade. After a largely, subdued trade, the S&P benchmark BSE Sensex on Wednesday closed at 40,850.29, higher by 174.84 points or 0.43 per cent from the previous close of 40,675.45 points.
It had opened at 40,606.01 and touched an intra-high of 40,886.87 points and a low of 40,475.83 points. The Nifty50 on the National Stock Exchange closed at 12,043.20, higher by 49 points or 0.41 per cent from its previous close.
(With Agency inputs)