DNA Money edit: Economic growth gets a decisive vote

The Reserve Bank of India (RBI)'s monetary policy committee has made a unanimous shout for economic growth. With the downward revision in India's GDP growth forecast for 2019-20 to 7% and inflation forecast of 3-3.7%, there was unanimity on a 25-basis points cut (one basis point is equivalent to one-hundredth of a percentage) along with a change in stance to accommodative. The reduction in the rate with which the RBI lends to banks (called repo rate in banking parlance) to 5.75%, the lowest in 9 years, will act as a growth stimulus. The change in stance means that further interest-rate cuts cannot be ruled out if the monsoon progresses favourably and the government remains committed to its fiscal consolidation path.

The fresh cut, third consecutive reduction of equal measure in four months, was widely anticipated after the Central Statistics Office (CSO) recently announced a tumble in the GDP growth rate in the fourth quarter to 5.8% from the earlier predicted 6.5%, primarily owing to a slowdown in the country's key sectors such as agriculture, industry and manufacturing.

The escalation of a trade war and the resultant weak global demand may continue to impair the investment climate in India and its exports. On the flip side, private consumption, especially in rural areas, has weakened in recent months. All these have left fewer options for the central bank.