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  1. RBI Annual Report: Raghuram Rajan strikes a cautious note; but lauds ‘Make in India’ & road construction

RBI Annual Report: Raghuram Rajan strikes a cautious note; but lauds ‘Make in India’ & road construction

RBI governor Raghuram Rajan in the central bank's Annual Report for 2015-16 has said that India's economic growth is still below its potential.

By: | Updated: August 29, 2016 5:38 PM
RBI Annual Report RBI Annual Report: Even as Raghuram Rajan struck a cautious note, he lauded the government’s initiatives and policy implementation. (Reuters Photo)

RBI governor Raghuram Rajan in the central bank’s Annual Report for 2015-16 has said that India’s economic growth is still below its potential. “Lead indicators during FY16 were mostly softer than a year ago,” Rajan said. But even as Rajan struck a cautious note, he lauded the government’s initiatives and policy implementation. “There has been a significant improvement in roads with respect to new constructions, especially in the national highways network. Ports have recorded the highest ever capacity utilisation in a single year. We saw the highest ever annual capacity addition in solar and wind energy segments,” the outgoing central bank governor said. “The business sentiment has improved in response to initiatives like ‘Make In India’,” he added.

Rajan sees rural wages increasing going ahead. “Rural wages have been growing since March and rose to 6.3% in April. They may continue to show a rising trend going ahead,” the annual report said. Rajan feels that the rise in two-wheeler and tractors sales since 2015 is an indicator of demand rise. Talking about private investment, he says, “It has been subdued due to low capacity utilisation. In the industrial sector, capex cycle is weak & private investment activity is listless. Consumption is the mainstay of modest GDP growth improvement,” Rajan feels.

On the inflation front, Rajan believes that policy rate changes led to 1/4th decline of inflation from April 2014 to December 2015. “Banks have cut median base rate by 60 bps after a 150 bps cut in repo rate,” he said. Rajan is of the view that the stage is set for declogging the banking system & enabling credit to flow.

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  1. Sajeev Unni
    Sep 5, 2016 at 7:07 am
    Hope that R3 will not join with UPA dynasty team.
    Reply

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