RBI May Maintain Low Interest Rates As Economic Recovery Slows Down

Contractions in both manufacturing and services sectors, which contribute more than two-thirds of India's gross domestic product, pulled the needle on an overall activity indicator to 5 from 6

India's economy showed signs of cooling in June as the slow easing of localized lockdowns hurt activity, a factor likely to encourage monetary policy makers meeting next week to consider keeping interest rates at record lows to foster a durable recovery. Contractions in both manufacturing and services sectors, which contribute more than two-thirds of India's gross domestic product, pulled the needle on an overall activity indicator to 5 from 6, a level not seen since February and the first downward shift since May 2020 data. The gauge uses a three-month weighted average to smooth out volatility, and a move left signifies loss of momentum. While the deadly second wave of Covid-19 has receded, the economy is facing a bumpy ride given the slow pace of vaccinations and the looming threat of another wave. A basket of high-frequency, alternative and market indicators such as retail activity and road congestion isn't showing the kind of strong recovery that was expected, Abhishek Gupta, India economist at Bloomberg Economics, said in a report published Tuesday. Here's more India data coming in the days ahead: