Reserve Bank Of India Governor Shaktikanta Das noted in the last monetary policy meeting that the economic activity has weakened further since the last MPC meeting in August 2019 with growth for Q1:2019-20 turning out to be 5%. Various high frequency indicators show that economic activity remained weak in Q2. Inflation has evolved broadly along the projected lines and remains benign; while food inflation has edged up further in the last two months reflecting the sharper than expected increase in food prices, CPI inflation excluding food and fuel has moderated consistent with the slowing down of the economy.
Overall, domestic demand has moderated significantly. The weakening of private consumption, which for long has been the bedrock of aggregate demand, in particular, is a matter of concern. Private investment has also lost traction, with the corporate sector reluctant to make fresh investments even though capacity utilisation in the manufacturing sector has operated close to the long-term average in the recent period. The unsettled global environment in the face of rising trade tensions has impacted India's exports, besides delaying the revival of private investment by creating uncertaint, he noted further.
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