Present Scenario of economic growth (GDP)
Lets see the status of current economic conditions, GDP is down to its three years low at 5.7% in the second quarter of Financial year 2017 because the exports went down in July 2017 and at the same time the consumption is also not growing that’s why the GDP is low.
Before now GDP was running at 6.1% and it was the time when inflation was around 2.36% that means the money supply was very less which led the businesses and consumption to run slow but GDP can never grow at this moment, this is the reason that RBI reduced the Interest rate by 25 basis points.
The reason of reducing the interest rate was to increase the money supply. When interest rate is low, most of the entrepreneurs and businesses take the loans on low rate of interest which would create more employment and consumption and GDP can go up again, but its been only 2 months of low interest rates so its possible that in upcoming days or maybe in next quarter, the GDP will start growing as money supply is increasing, although inflation had also come up by 1%.