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RBI re-evaluates GDP forecasting after Q1 print caught it off guard

RBI had recognised the slowdown in February, which led it to cut in policy rate by 25 bps.

ETMarkets.com|
Updated: Sep 16, 2019, 08.20 PM IST
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RBI Governor Shaktikanta Das on Monday said India's June quarter GDP growth print at 5 per cent came in as a big surprise for the central bank, whose growth forecast at 5.8 per cent was way off the mark.

This, he said, has set off an internal review within the Reserve Bank of India to find out "what we missed out, where we went wrong."

"We are examining the GDP much more closely now," the governor told ETNOW in an exclusive interview. "In inflation forecasting, we are almost on the dot now. The margin of error has come down significantly. We want to get more accurate with GDP forecast too," he said.

Read Shaktikanta Das' full interview here

Asked when RBI expects growth to recover, Das refused to give a timeline. "We have to see the Q2 numbers, and figure out whether the slowdown will sustain," he said.

Das, however, said as early as in February, RBI had recognised the slowdown in the economy, which led it to cut in policy rate by 25 basis points.

"We identified growth as our highest priority in August. We have also maintained that it cannot be business usual now and the economy needs something more. Therefore, we went for 35 basis points cut in August," he said.

He, however, did not respond when asked if on hindsight he felt the 35 bps rate cut was too less. "That would be a giveaway with the next MPC meeting ahead," he said.

Das defended RBI’s push for external benchmarking of retail loans of banks. “We have not forced their hands on what margins they should keep. There is no interference in their autonomy. And if they have any specific issue, we are always ready to listen and address them,” he said.

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