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RBI lists out 4 factors that will drive India’s growth in FY21

RBI projected GDP growth for 2020-21 at 6 per cent considering the factors.

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Last Updated: Feb 06, 2020, 12.49 PM IST
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The RBI added that private consumption is expected to recover on the back of improved rabi prospects.
While maintaining the key interest rates constant on Thursday, the Reserve Bank of India (RBI) said that the growth outlook for the financial year 2020-21 will be influenced by several factors including private consumption, particularly in rural areas.

The RBI added that private consumption is expected to recover on the back of improved rabi prospects. The recent rise in food prices has shifted the terms of trade in favour of agriculture, which will support rural incomes.

Secondly, the central bank further added that the easing of global trade uncertainties should encourage exports and spur investment activity. “The breakout of the coronavirus may, however, impact tourist arrivals and global trade,” it said.

RBI also believes that monetary transmission in terms of a reduction in lending rates and financial flows to the commercial sector has progressed and could spur both consumption and investment demand in the country.

The rationalisation of personal income tax rates in the Union Budget 2020-21 should support domestic demand along with measures to boost rural and infrastructure spending, it added.

Considering the aforementioned factors, RBI projected GDP growth for 2020-21 at 6 per cent. Real GDP growth for 2019-20 was projected at 5 per cent in the December 2019 policy.

After three-day deliberations, the Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, observed that the economy continues to be weak and the output gap remains negative.

Das said, “Investment outlook is showing a sign of improvement in the economy. Inflation pressure could ease in FY21. Policy space is available and further action will depend on the evolving situation.”

The RBI kept key policy rates unchanged at 5.15 per cent, maintaining its accommodative policy stance as long as it was necessary to revive growth.

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