Reserve Bank governor Shaktikanta Das Wednesday said the economy is in the midst of a cyclical slowdown and not a structural one, and exuded confidence of growth reviving soon on the back of cheaper money and likely more government measures.
He expressed confidence that the government will come up with more measures to revive the sagging growth, which dipped to a five-year low of 5.8 percent for the March quarter and is widely expected to slip further in the June quarter.
At the same time, the MPC lowered its growth forecast to 6.9 percent now from 7 percent it had projected in the June policy but Das made it clear that downward revision is not with a downward risks.
Das said according to the RBI's understanding, "the growth slowdown is not structural but cyclical," and expects growth to revive in the second half.
Speaking to reporters after the six-member MPC cut the key rates by a steeper 0.35 bps to 5.4 percent in their fourth consecutive action since February, Das expressed satisfaction on transmission and hoped credit growth will also pick up soon helping rev up the growth engine.
Das said with the deeper rate cut this time around, the central bank expects more lending rate cuts by the banks in the coming weeks and noted that the money markets have fully absorbed the rate actions since February.
"The impact of monetary policy easing is expected to help economic activity going forward," he said.
Das also dismissed notions of carterlisation by banks on holding onto high lending rates, pointing out that the largest lender SBI has taken the lead last month and others will follow soon.
He said government and RBI are taking all possible measures in tandem to help push up the growth process. But he was soon to assert that the MPC decision is independent.
It can be noted that a slew of industry leaders, including engineering giant L&T chairman AM Naik and Godrej Group chairman Adi Godrej have of late expressed disappointment on the economy and called for more measures to revive growth with faster decision making and ensuring communal harmony.
Das said the central bank will ensure that there is adequate liquidity in the system to help growth and also ruled out a cut in the cash reserve ratio (CRR) at the moment.
Meanwhile, Das declined to voice RBI's views on the government idea of sovereign borrowing from abroad, saying it conveys its views internally at the highest level.
On the crippled NBFC sector, he said the RBI endeavour is to ensure that none of the systematically important NBFCs fall by the wayside.