Post the Monetary Policy Review, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC), lowered its GDP (gross domestic product) target for the financial year 2019-20 from 7.2 percent to 7 percent citing weakness in global demand and reduced investment activity domestically.
"The MPC (monetary policy committee) notes that growth impulses have weakened significantly A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern," it said in its policy resolution.
Back in April, the MPC had projected GDP growth at 7.2 percent for FY20 with 6.8-7.1 percent for the first half of the fiscal and 7.3-7.4 percent for the second.
The MPC, which decides key policy rates, said that the data for the January-March 2019 quarter showed that domestic investment activity had weakened with overall demand partly weakened from slowing exports.
Further, the RBI raised its forecast on retail inflation marginally from the earlier 2.9-3 percent to 3-3.1 percent for the first half of the current fiscal year. However, projections for the second half were cut to 3.4-3.7 percent as against RBI's previous projection of 3.5-3.8 percent.
On growth, the MPC said that weak global demand amid escalation in trade wars may further affect India's exports and investment activity. Private consumption, especially in the rural areas had weakened in the recent months.
It also said that liquidity has improved with an average daily surplus of Rs 66,000 crore in early June in the system after remaining in deficit during April and most of May on restrained government spending.