Recent policy measures by the government to improve the investment climate and boost private consumption and investment will help India to lift economic growth in the next two fiscal years, according to a new report from the Asian Development Bank.
Reversing two years of declining growth, India’s gross domestic product (GDP) is projected to rise to 7.2 per cent in fiscal 2019, says Asian Development Outlook 2019. GDP is further expected to rise to 7.3 per cent in FY20 as reforms to improve the business and investment climate take effect. India will remain one of the fastest-growing major economies in the world this year given strong household spending and corporate fundamentals. The country’s young workforce, an improving business climate, and a renewed focus on export expansion all support this.
Further ADO 2019 mentioned that income support to farmers, hikes in procurement prices for food grains, and tax relief to tax payers earning less than Rs. 5,00,000 will boost household income. Declining fuel and food prices are also expected to provide an impetus for domestic consumption.
Meanwhile, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) to 6.0 per cent from 6.25 per cent with immediate effect. Consequently, the reverse repo rate stands adjusted to 5.75 per cent, and the MSF rate and the Bank Rate to 6.25 per cent.
The garment exporters have requested all banks to come forward and pass on the reduction of interest rate to the borrowing units, which is desperately required for the exporting units, particularly to MSME which are suffering further to macroeconomic changes. The reduction of interest will pave way for the growth of investment and exports.