RBI pegs GDP growth at 5-6%, but says more action required

Written by fe Bureau | Mumbai | Updated: Jan 29 2014, 09:20am hrs
The GDP growth for 2013-14 will be in the range of 5-6%, the RBI said on Tuesday in its report on macro-economic and monetary developments.

At the same time, the RBI said, more action was necessary to achieve the target. The Reserve Banks assessment is that a gradual recovery could set in, though further action will be needed to secure it. The GDP growth is likely to be in the range of 5-6%, with risks balanced around the Central estimate of 5.5%, the report said.

The RBI's survey of professional forecasters also pegged the GDP growth for 2014-15 at 5.6%, a downward revision of 20 bps from the earlier estimate last quarter. The survey also said that growth had bottomed out for 2013-14 at 4.8%. It made a significant downward revision in the forecast for the current account deficit (CAD) for 2013-14 to 2.7% from 3.5% forecast earlier.

On current reckoning, growth in 2013-14 is likely to fall somewhat short of Reserve Banks earlier projection of 5%. However, a moderate-paced recovery is likely to (take) shape in the next year with support from rural demand, a pick-up in exports and some turnaround in investment demand, the report said. The survey also said that consumer price index (CPI) inflation is expected to exhibit persistence and decline slowly, averaging 8.9% in second quarter of 2014-15 and 8.5% for the full year.

The RBIs Industrial Outlook Survey showed that business confidence has started to rebuild in the third quarter of 2013-14. The Business Expectation Index improved marginally for Q3, but still remained below the threshold level of 100, separating contraction from expansion. An analysis of the net responses for various components of demand conditions shows marginal improvement in sentiments regarding production, order books, capacity utilisation, exports and imports for Q3 of 2013-14. The demand outlook for Q4 of 2013-14 shows improved optimism as well, the RBI report added.