Macro indicators still a worry

NEW DELHI: The Reserve Bank of India’s Monetary Policy Committee (MPC) projected GDP growth for the current fiscal year at 6.9% following its meeting in August. On Friday, the MPC brought it down to 6.1% — the sharpest reduction in projected GDP growth rates since the MPC’S inception in October 2016.

Even this gloomy forecast is based on an implicit optimism. The MPC predicted GDP growth in the second quarter of the current fiscal year at 5.3%, and that it will climb to 6.6% to 7.2% in the second half. In June, however, GDP growth was 5% — which means MPC expects December and March quarters to be much better in terms of growth. Such a strong intra-year economic activity is not common.

The RBI’S Monetary Policy Report released on Friday is unequivocal in recognising a crisis of aggregate demand in the economy. It points towards a slowdown in private consumption and in flow of funds to the commercial sector and economic headwinds from global uncertainties. This is captured in statistics from RBI’S Consumer Confidence Surveys (CCS) and outstanding credit for industry -— net share of respondents who see their non-essential spending increasing in the current period has turned negative for the first time. The current net perception on employment is also the worst ever, with 52.5% of the people reporting a decline in employment.

RBI’S ASSESSMENTS RECOGNISE A CRISIS IN AGGREGATE DEMAND, AND ITS SURVEYS HAVE NOTED A SHARP FALL IN CONSUMER CONFIDENCE