The Reserve Bank of India lowered India's economic growth projection for the current financial year to 6.1 per cent from 6.9 per cent projected in the August monetary policy.
"Various high frequency indicators suggest that domestic demand conditions have remained weak. The business expectations index of the Reserve Bank's industrial outlook survey shows muted expansion in demand conditions in Q3. Export prospects have been impacted by slowing global growth and continuing trade tensions," the Reserve Bank of India said in its policy document.
The Reserve Bank of India's cut in GDP growth forecast comes at a time when the country's growth logged slowest pace of growth in six years of 5 per cent in the first quarter of current financial year and unemployment rose to highest level in 45 years.
The Reserve Bank of India noted that the first quarter GDP growth which was projected at 7.4 per cent was significantly lower than their estimates.
The RBI however noted that the impact of monetary policy easing since February 2019 is gradually expected to feed into the real economy and boost demand. Several measures announced by the government over the last two months are also expected to revive sentiment and spur domestic demand, especially private consumption.
The Reserve Bank of India has projected GDP growth of 5.3 per cent in second quarter of current financial year and in the range of 6.6-7.2 per cent for second half of 2019-20 with risks evenly balanced. GDP growth for first quarter of financial year 2020-21 was also revised downwards to 7.2 per cent.