The Reserve Bank on Tuesday lowered the economic growth forecast for the current fiscal to 7.6 per cent from 7.8 per cent projected in April, citing various risks, including poor monsoon and rising crude oil prices.
“Reflecting the balance of risks and the downward revision to GVA (gross value added) estimates for 2014-15, the projection for output growth for 2015-16 has been marked down from 7.8 per cent in April to 7.6 per cent with a downward bias to reflect the uncertainties surrounding these various risks,” RBI Governor Raghuram Rajan said.
CSO (Central Statistics Office) has come out with GVA to measure economic growth.
Real GVA, that is GVA at basic constant prices (2011-12) in 2014-15 is now estimated at Rs 98.27 lakh crore (as against Rs 98.58 lakh crore estimated earlier on February 9, 2015), showing a growth rate of 7.2 per cent (as against 7.5 per cent estimated earlier).
Talking about the risks, Rajan, while unveiling second bi-monthly monetary policy review said, some forecasters, notably the IMD, predict a below-normal southwest monsoon putting pressure on food inflation.
“Second, crude prices have been firming amidst considerable volatility, and geo-political risks are ever present. Third, volatility in the external environment could impact inflation,” he said.
Since the last policy in April, the crude oil prices have witnessed an increase of 9 per cent and are hovering around USD 65 per barrel.
Retail inflation is expected to rise to 6 per cent by January, 2016 from the level of 4.87 per cent in April.
Both, lower than average monsoon and higher food inflation would lead to reduction in demand and hamper growth.
About 60 per cent of population is dependent on agriculture.