Reserve Bank of India Governor Shaktikanta Das said on Friday that with the government spending gaining momentum, economic growth is expected to be better in the second quarter of the current financial year. The comments from the RBI Governor come on a day Finance Minister Nirmala Sitharaman announced a reduction in corporate tax rates in a big boost to companies, and said that the latest measures will cost the government Rs 1.45 lakh crore in revenue. "From the second quarter government expenditure has been picked up. So second quarter numbers will be hopefully better than the first quarter," Mr Das said.
Addressing an India Today event in Mumbai, the RBI Governor said government expenditure was very low in the first quarter due to the elections, pulling down the growth numbers to some extent. Government spending has a major role to play in GDP numbers, he said.
He said for the first quarter, the RBI analysis showed growth to be at 5.8 per cent and all the surveys it did also projected growth to be in the range of 5.5-5.8 per cent but the final print was much lower.
"When it came in at 5 percent it was a surprise. That is perhaps due to conflicting signals in the economy," Mr Das added.
On Reserve Bank of India (RBI) rate cut, Mr Das said that future rate cuts will depend on the incoming data but warned that we cannot have lower interest rates like in advanced economies.
Since February, the RBI has reduced repo rate by 110 basis points in four successive actions with the last one being 35 basis points, pulling down the policy rates to a nine-year low of 5.4 per cent.
On the crippled non-banking financial companies (NBFCs) which have been facing liquidity crisis for a year now, he said the RBI is very closely monitoring the top 50 NBFCs, which account for roughly 75 per cent of the loan outstanding of the industry.
On Thursday, Mr Das had warned the government against any fiscal measures to boost the sagging economy given its limited fiscal space. He said the RBI could still do more to spur growth, given softer inflation, which is likely to remain under the targeted 4 per cent over the next 12 months or so, giving it more legroom to pursue an easy money policy.
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