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Rajiv.9.Thmb.jpg Rate cut positive step, H2 growth likely to be better: Rajiv Kumar

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Anjana Das | 22 Oct, 2019
The Reserve Bank of India has done a good job with the latest rate cuts of 25 bps and along with the recent fiscal measures taken by the government, the second half growth is likely to be much better, Niti Aayog Vice chairman Rajiv Kumar said on Friday.

"RBI has done a good job, it will absolutely add to the already taken growth initiatitives of the government. We hope the RBI decision on repo rate cut is going to create consumption demands during the festival time. Lets see how it works out," Kumar told IANS in an exclusive interview.

The government think tank feels the second half of the fiscal (Oct-March) is expected to be better with RBI's lower repo rates, including Friday's and the host of fiscal steps taken by the government.

"I think the higher Q2 and Q3 growth estimates of the RBI (current fiscal from 5 per cent in Q1) are surely sustainable with today's cut (repo rate) and on the back of a lot of fiscal support from the government. As far as H2 growth is concerned which RBI has pegged it at 6.6 per cent - 7.2 per cent, I think we are on a higher growth trajectory (in H2) with all support measures government has taken and now with RBI repo rate cut, the second half will be much better than the first half.

If the H2 growth rates becomes higher a bit more, it can of fset the lower growth rate for the whole year (FY 20) as estimated by RBI a t 6.1 per cent, down from 6.9 per cent," he said.

Kumar noted in the current low growth scenario, if inflation and fiscal deficits are tinkered with appropriately, should not be a concern.

"Inflation even if it goes up a little bit but adheres to the range of RBI at 4 per cent, it is ok. Fiscal deficit is not really a concern at this moment," he said.

The Reserve Bank of India on Friday cut interest rates for the fifth time this year to kickstart the languishing economy as it slashed the GDP growth projection for financial year 2019-20 to 6.1 per cent from the earlier forecast of 6.9 per cent.

RBI has estimated 5.3 per cent for Q2, 6.6 per cent for Q3 and 7.2 per cent for Q4, all higher than the Q1 growth though overall growth it has slashed for the fiscal.

The Monetary Policy Committee in its August meeting had already trimmed the GDP growth forecast for this financial year to 6.9 per cent from 7 per cent with a downward bias.

On Friday, GDP prediction for the first quarter of the upcoming financial year was also reduced to 7.2 per cent from 7.4 per cent.

The MPC noted that private final consumption expenditure slowed down to an 18 -- quarter low. The statement also stated that growth in the services sector was stalled by construction activity.

The government has also announced a series of measures, including steepest cut in corporate tax, rollback of enhanced surcharge on Foreign Portfolio Investors, among others to jump-start growth, which hit a six-year low of 5 per cent during the first quarter of the current fiscal.

Retail inflation in August accelerated to a 10-month high but remained well below the RBI's medium-term target of 4 per cent for a 13th straight month.

The RBI also cut its GDP growth estimates to 6.1 per cent, from earlier estimate of 6.9 per cent.
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