India's potential growth rate below 6%: RBI report

With growth trending below the 5 per cent mark for three successive quarters, the

RELATED ARTICLES

Reserve Bank today pegged economic expansion at less than 6 per cent from the earlier expectation of over 8 per cent.

"The wide range of estimates using alternative techniques, on balance, suggests that currently the potential growth may be even somewhat lower than 6 per cent," RBI said in its Macroeconomic and Monetary Developments Report released today.

It said a decline in financial savings, sluggish growth in capital formation over successive quarters, persistently high inflation and low business confidence are the major reasons for the revised estimate.

However, it said a modest recovery is likely to take shape in 2014-15.

The document said potential growth, which hovered at 8-8.5 per cent levels in the period from the second quarter of 2005-06 to the second quarter of 2008-09, has gone down to 6 per cent.

RBI Governor Raghuram Rajan's predecessor D Subbarao had once suggested that the potential growth of the economy was 7.3 per cent.

A survey of potential forecasters done by the RBI revised growth for FY15 to 5.5 per cent from the earlier estimate of 5.6 per cent.

On inflation, one of the key factors that forced the RBI to keep a tight monetary policy, which in turn affected growth, the document said that the disinflationary path is moving as expected but stressed on the need to be vigilant.

Warning of upside risks to inflation in FY15, it said the recent declines in CPI inflation were primarily driven by lower food prices, the benefit of which would wear out with seasonal changes.

CPI inflation, which assumed greater focus under Rajan, eased by over 3 percentage points to 8.1 per cent in February, while the RBI is targeting 8 per cent by January 2015.

The professional forecasters also lowered their estimate on the average CPI during FY15 to 8 per cent from 8.5 per cent earlier.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • Amidst Sino-Indian bonhomie, the Tibet issue cannot be wished away

    Tibet did not figure in the three-day high-level meetings between India and the People’s Republic of China (PRC).

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Varun Dutt

<b>Riskfactor</b>: Intertemporal choices

Intertemporal choice is the study of the relative value people ...

Parvez Imam

Why we all have blood on our hands

What does the Jammu and Kashmir flood make us think? ...

Dharmendra Khandal

The peculiar possibilities of animal poop

You can tell a lot about an animal by its ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture