The RBI said in a statement on developmental and regulatory policies as part of its third bi-monthly monetary policy review this fiscal that it has accorded priority sector status to bank loans to registered non-banking finance companies or NBFCs for on-lending to finance agriculture activities upto ₹1 million.
With the headwinds to growth rising from all around, Reserve Bank governor Shaktikanta Das Wednesday admitted the economy is in a slowdown mode, but termed it as cyclical and not structural one, and exuded confidence growth will pick up the momentum fast.
Revises downwards GDP growth for 2019/20 to 6.9% from 7.0%.
The brokerage firm further said that the current macroeconomic environment warranted a 50 bps rate by the RBI. In the present scenario where the country's growth has been seen slowing down, cutting down interest rates will mean reduced burden on banks who will also eventually reduce their interest rates, thus encouraging more people to borrow.
Inflation projected to remain within target over a 12-month ahead horizon.
"Amongst 3 indicators of urban demand, passenger vehicle sales contracted for the eighth consecutive month in June; however, domestic air passenger traffic growth turned positive in June after three consecutive months of contraction".
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Noting that inflation is now projected to remain within the target over a 12-month ahead horizon, the MPC said since the last (June) policy, domestic economic activity continues to be weak, with the global slowdown and escalating trade tensions posing downside risks.
Aggregate demand, investment activity remain sluggish. "GDP growth in the USA decelerated in Q2:2019 while in the Euro area, too, GDP growth moderated during the period on worsening external conditions".
Inflation outlook: The committee projected the CPI inflation at 3.1 per cent for the second quarter of the financial year 2019-20 (FY20) and 3.5-3.7 per cent for the second half of the fiscal year (H22019-20), with risks evenly balanced.
The six-member monetary policy committee (MPC) also maintained the "accommodative stance" on the monetary policy. In its June policy meet, the RBI had changed the stance to accommodative to neutral.