THE Reserve Bank of India (RBI) is keeping its fingers crossed on the impact of series of monetary and fiscal initiatives in reversing the slowdown in growth. Speaking in this regard, the Governor of the RBI, Mr Shaktikanta Das, stated that the impact of all the policy rate cuts remained to be seen. It also had to be seen as to how the fiscal measures which the Government took over the past few months in three separate instalments, had fared, along with the much-celebrated corporate tax rate cut. The impact of these measures on the economy had to be examined. Keeping these factors in mind, the Monetary Policy Committee (MPC) took the call of reducing 25 basis points, Mr Das stated.

The RBI chief was addressing a press conference after releasing the fourth bi-monthly monetary policy on October 4, 2019. He also stated that the global economy lost further momentum since the MPC's meeting in August 2019. The trade and geo-political tensions had purveyed heightened uncertainly. Among advanced economies, the slowdown in the second quarter of 2019 appeared to have extended into the third quarter too. For emerging market economies, the worsening global economic and trade environment weighed upon macroeconomic performance. Regarding the domestic economy, Mr Das admitted that the slump in real GDP growth to 5% in the first quarter of 2019-20 has been followed by generally weaker high frequency indicators for the second quarter. Industrial production was lower in July 2019 on a year-on-year basis, pulled down mainly by manufacturing.

Mr Das further observed there to have been contraction in the production of capital goods and consumer durables. The output of eight core industries also contracted in August, with the production of coal, electricity, crude oil and cement decelerating or going into contraction. He added that the manufacturing PMI for September 2019 was flat, though still in the expansion zone. High frequency indicators suggest that services sector activity weakened in July-August. Indicators of rural and urban demand continued to slow down in July-August. The Reserve Bank’s consumer confidence survey also shows weak consumer sentiment, especially relating to non-essential items.