The Reserve Bank of India on Wednesday cut its growth forecast to 6.7 percent from its earlier projection of 7.3 percent.
In its fourth monetary review statement, the deferal bank said, “Turning to growth projections, the loss of momentum in Q1 of 2017-18 and the first advance estimates of kharif foodgrains production are early setbacks that impart a downside to the outlook. The implementation of the GST so far also appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term. This may further delay the revival of investment activity, which is already hampered by stressed balance sheets of banks and corporates.
“Consumer confidence and overall business assessment of the manufacturing and services sectors surveyed by the Reserve Bank weakened in Q2 of 2017-18; on the positive side, firms expect a significant improvement in business sentiment in Q3. Taking into account the above factors, the projection of real GVA (gross value added) growth for 2017-18 has been revised down to 6.7 per cent from the August 2017 projection of 7.3 per cent, with risks evenly balanced.”
The RBI also decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.0 per cent. It said, “Consequently, the reverse repo rate under the LAF remains at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25 per cent. “
The gloomy forecast by the RBI comes when Indian economy has been going on the downward journey and the slump in growth dominating the political conversation.
Two key economic measures being blamed for the mess in economy are the demonetisation announcement by Prime Minister Narendra Modi last year and the roll out the GST in July this year.
Former BJP union minister, Arun Shourie, on Tuesday had slammed the Modi government for the note ban announcement calling it the largest ever money laundering scheme sponsored by the government.
Shourie’s criticism comes just days after veteran BJP leader and his former cabinet colleague, Yashwant Sinha, slammed Modi government for landing the economy into an utter mess.
Writing in the The Indian Express, Sinha, who held the finance portfolio in the Atal Bihari Vajpayee government, had said that he will be failing in his ‘national duty’ if he did not ‘speak up’ now against the ‘mess the finance minister has made of economy.’