Explained: Why SBI expects India’s Q2 GDP to grow by just 4.2%

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News:According to State Bank of India Ecowrap report,India’s GDP growth will slow down further in the second quarter(July to August),2019 to 4.2%.

Facts:

Highlights of the report:

  • The report has forecasted GDP growth rate at 5 percent for FY 2019-20 from the earlier projection of 6.1 percent.
  • The slowdown in growth will be due to (a)low automobile sales, (b)deceleration in air traffic movements (b)flattening of core sector growth and (c)declining investment in construction and infrastructure.
  • It also underlines the adverse impact due to excessive rainfall related flooding and the ongoing global economic slowdown.
  • However,the report has said that the economic growth rate will pick up pace in 2020-21 to 6.2 percent.

Suggestions:

  • The report expects the Reserve Bank of India(RBI) to cut rates further when the Monetary Policy Committee meets in December, 2019.
  • However,the report has said the rate cut is unlikely to lead to any immediate impact.
  • The report has also suggested the government to bring lasting solution for the Non banking financial Companies(NBFC) to ensure the stability of the financial system.