New Delhi: The Reserve Bank of India on Thursday released its annual report FY2019, outlining several factors concerning the Indian economy. Highlighting the prospects for 2019-20, RBI said that reviving consumption and private investment should be the priority of the government.
“Reviving consumption demand and private investment has assumed the highest priority in 2019-20. This may involve strengthening the banking and non-banking sectors, a big push for spending on infrastructure and implementation of much needed structural reforms in the areas of labour laws, taxation, and other legal reforms, which will also enhance ease of doing business in pursuit of fulfilling the vision of India becoming a USD 5 trillion economy by 2024-25.”
The Central Bank expressed concerns that India’s external sector outlook is vulnerable to downside risks from global developments, especially the possibility of the global downturn deepening, the uncertainty surrounding international crude oil prices and the volatility of capital flows.
During the first four months of 2019-20, India’s exports as well as imports have dipped into contraction. Net FDI inflows were robust at USD 14.5 billion in Q1:2019-20 as compared with US$ 9.6 billion a year ago.
Foreign portfolio investment recorded net inflow of USD 2.4 billion in 2019-20 so far (up to August 16) as against net outflow of USD 8.2 billion in the corresponding period of 2018-19. India’s foreign exchange reserves at USD 430.5 billion as on August 16, 2019 increased by USD 17.6 billion since end-March 2019.
“Against this backdrop, and particularly taking note of the slowdown in investment activity and headline inflation trajectory remaining below target, the MPC reduced the policy rate by 85 bps during April-August 2019 (in addition to the 25 bps reduction in February 2019), along with a change in the stance from neutral to accommodative in June 2019,” RBI said.
The Central Bank added that the conduct of monetary policy would continue to be guided by the objective of achieving the medium-term target for CPI inflation of 4 percent within a tolerance band of +/- 2 percent, while supporting growth.