On Thursday, the Reserve Bank of India (RBI) lowered the GDP (gross domestic product) growth forecast for the financial year 2019-20 to 7.2 percent from the earlier estimate of 7.4 percent. The projection was reduced on the back of uncertainty prevailing in the global economic atmosphere and the possibility of the El-Nino effects on monsoon rains.
Previously in its February monetary policy statement, the central bank had estimated a GDP growth of 7.4 percent for the FY 2019-20 with 7.2-7.4 percent for the first half of the fiscal year (April to September 2019).
Signs of weakening domestic activity from a slowdown in production and imports of capital goods since the previous policy meet were the basis of the revised forecast.
"The moderation of growth in the global economy might impact India's exports," the central bank said after its three-day Monetary Policy Committee meet.
However, it said that higher financial flows to the commercial sector will prove good for economic activity. Further, private consumption, that has remained resilient, is also expected to get a push from public spending in rural areas and increased disposable income of households due to tax benefits. Business expectations remain optimistic.
"GDP growth for 2019-20 is projected at 7.2 percent - in the range of 6.8-7.1 percent in first half of 2019-20 and 7.3-7.4 percent in the second half - with risks evenly balanced," the RBI said.