India's 5% GDP Growth A 'Surprise', Current Account Under Threat If Oil Surge Continues: RBI

RBI Governor Shaktikanta Das on Monday said India’s GDP growth of 5 per cent “definitely” looks much worse because the RBI had projected 5.8 per cent, terming numbers as a "surprise". He, however, expressed confidence that the economy will look up with a host of measures taken by the government.

He added that the RBI has been cutting rates to give a boost to the economy as slowdown was visible for the past few months.

The RBI slashed benchmark interest rate four times consecutively since January 2019. The central bank reduced the repo (short term lending) rate by 1.10 percentage points during the year.

"I think with right measures taken, things should improve. It's a positive trend that the government is responding very fast and I don't think we have heard the last from the government with regard to dealing with the current economic situation ... My expectation is that it will be a continuous process and they would definitely be dealing with other challenges," he told CNBC-TV18. 

The government announced a slew of measures in three dosages which include a special window for real estate, export incentives, bank consolidation and sops for MSMEs and the automobile sector.

With regard to structural reforms, he said the RBI has already pointed out in its annual report.

"I think one major thing would be agriculture marketing. Definitely, I would expect some action from the government with regard to reforms in agricultural marketing," he said.

"I think almost everybody had projected not below 5.5 per cent or so, but the number 5 per cent is a surprise," he said.

He also said the second quarter growth of all advanced economies was lower than the first quarter so there is a deceleration.

"But again I am not trying to justify our slowdown through the prism of the global slowdown although global slowdown does impact growth and results in slowdown we have domestic issues also," he said.

Asked when will the economy see revival, Das said it is difficult to make an estimate as there are many things which are still playing out.

"Now for example the Saudi oil crisis it was something totally unanticipated. The trade issue between two largest economies some statements here it appears that they are going on the brink but then they pull back...so much of uncertainty happening all around," he said.

How various factors play out in the second quarter, the RBI will analyse and make assessment, he added.

He also said India’s current account and fiscal deficit could take a hit if oil prices continue to rise after an attack on Saudi Arabian oil facilities over the weekend.

“We should allow a few more days to see how the situation plays out before taking a final view...depending on how long it persists it will have some impact on the current account deficit and further perhaps on the fiscal deficit if it lasts longer,” Das said.

Das said it was important to see whether alternative sources of supply come up and how soon the installations take to resume operation.

US officials blamed Iran for the attack, which damaged the world’s biggest crude oil processing plant and led to a 19% surge in oil prices. Iran denied blame and said it was ready for “full-fledged war”.

A jump in oil prices is a negative for emerging markets such as India, which is the world’s third-biggest importer of oil.

(With PTI inputs)