On the basis of an assessment of the current and evolving macro-economic situation, the MPC at its meeting held on the December 5, 2019 decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15%.
The decision is in consonance with the objective of achieving the medium term target for consumer price index inflation of 4% within a band of +/-2% while supporting growth. Since MPC’s meeting in October 2019, global economic activity has remained subdued, though some signs of resilience are becoming visible.
Turning to the growth outlook, real GDP growth for 2019-20 in the October policy was projected at 6.1%. However, GDP growth for Q2 2019-20 turned out to be significantly lower than projected. Various high frequency indicators suggest that domestic and external demand conditions have remained weak.
On the positive side, however, monetary policy easing since February 2019 and the measures initiated by the Government over the last few months are expected to revive sentiment and spur domestic demand.
Taking into consideration these factors, India’s real GDP growth for 2019-20 is revised downwards from 6.1% in the October policy to 5%.