RBI rings alarm bells, says India's economic growth may fall under 5.8%, caps rate cut talk
On an overall assessment of macro-economic situation, the RBI said, monetary policy would undertake only calibrated action in view of inflation, which at over 7.18 per cent in December, was much above the central bank's comfort level.
Average WPI inflation, it said, was expected to moderate from 7.5 per cent in 2012-13 to 7.0 per cent in 2013-14.
The economic growth in 2012-13 was likely to fall below its projection of 5.8 per cent, RBI said, adding "output gap may start closing in 2013-14 although at a slow pace on the back of some revival in investment and consumption demand."
The revival of growth, which has remained below potential for the fifth successive quarter might take some more time as "policy initiatives of the government are yet to show up fully or definitively in data." the RBI said.
Moreover, it said, the weak industrial performance was likely to persist on account of factors like subdued external demand and lack of reliable power supply amidst coal shortages.
"Investment intentions in new projects improved marginally in Q2 of 2012-13, but investment is held back by project delays. Coal supply issues facing power sectors are yet to be fully resolved. Road investments have stalled due to issues relating to environmental clearances, land acquisition and financial closures", RBI said.
Observing that improvement in investment climate is a prerequisite for economic recovery, the RBI said, "demand conditions remained tepid, with private consumption continuing to decelerate and with investment yet to recover".
It further said that the trend of sluggish
Be the first to comment.