RBI Expects Growth To Pick Up From Q2 On Government Spending


RBI Governor Shaktikanta Das exuded confidence that second-quarter GDP numbers will be better than the previous one as the government has started spending again

Written By Press Trust Of India | Mumbai | Updated On:

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday exuded confidence that second-quarter GDP numbers will be better than the previous one as the government has started spending again. Attributing the 5 per cent GDP growth in Q1, which is a six-year low and is even lower than that of Pakistan's 5.4 percent, to very low government spending, Das said with the Centre opening its coffers again growth should pick up going forward.

Cut down on Corporate Tax

The Governor also welcomed the government announcement in the morning to slash corporate tax across the board and termed the same as bold moves which should benefit all sectors. In a major fiscal booster, the government slashed effective corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic companies. Finance Minister Nirmala Sitharaman on Friday said that the revenue foregone on reduction in corporate tax and other relief measures will be Rs 1.45 lakh crore annually. This, she said is being done to promote investment and growth. Das also reiterated the possibility of more rate cuts if incoming data support such a move but warned against government initiating any fiscal expansion, saying it has no legroom to do so given the high deficit numbers. He also called for urgent structural reforms especially inland and labour as well as entrepreneurial areas.

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Shaktikanta Das on external sector

Shaktikanta Das has said that there has been no recession in the global economy. However, there exists a hostile environment that is a ground for India’s external sector to show great resilience and viability. Talking at the Bloomberg India Economic Forum 2019, Governor Shaktikanta Das said:

“India's external sector has exhibited resilience and viability. The current account deficit has averaged 1.4% of GDP over the last 5 years and remains comfortably financed in spite of global spillovers imparting risk-on-risk-off volatility to portfolio flows. The level of foreign exchange reserves was at USD 429 billion on September 13, sufficient to cover close to 10 months of imports or 21 months of debt of residual maturity up to 1 year. The Indian economy remains a preferred habitat for foreign direct investment (FDI) and is among the top 10 destinations for greenfield projects.  Net foreign direct investment at US$ 18.3 billion in April-July 2019 was higher than US$ 11.4 billion in the corresponding period of 2018-19”.

READ | WPI Inflation Remains Unchanged In August, Raises RBI Rate Cut Hopes

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