Bright growth outlook for H2, but new risks seen in FY26: Finance Ministry
In its economic review for November, the ministry also said the «combination of monetary policy stance and macro-prudential measures by the central bank may have contributed to the demand slowdown» in the first half of FY25. It termed the RBI's move to lower the cash reserve ratio to 4% from 4.5% as «good news». This will enable banks to lend more and should help boost credit growth, which has «slowed a little too much and quickly in FY25», the ministry said.
RBI has, however, maintained the repo rate at 6.5% since February 2023 to curb price pressure.
Last month, commerce and industry minister Piyush Goyal had exhorted the RBI to lower the interest rates. FM Nirmala Sitharaman, too, had flagged «stressful» bank interest rates and underscored the need for lowering industry's borrowing costs.
The ministry's review said sluggish hiring and compensation practices in the corporate sector despite robust profitability have also played their part in the urban consumption growth slowdown, even as rural demand remains resilient.
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