The Reserve Bank on August 9 retained growth projection for the current fiscal at 7.6 per cent but cautioned that sluggishness in global economy may neutralise India’s momentum which has been built up by good monsoon and uptick in rural demand.
In its 3rd bi-monthly monetary policy review, RBI said the momentum of growth is “expected to be quickened” by the normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to consumption spending that can be expected from the 7th Central Pay Commission’s award.
“The current accommodative stance of monetary policy and comfortable liquidity conditions should also provide a congenial environment for the reinvigoration of aggregate demand conditions,” RBI Governor Raghuram Rajan said.
However, successive downgrades of global growth projections by multilateral agencies and the continuing sluggishness in world trade points to further slackening of external demand going forward, he added.
“Accordingly, the GVA growth projection for 2016-17 is retained at 7.6 per cent, with risks facing the economy at this juncture evenly balanced around it,” he said.
On Goods and Service Tax (GST), the Governor said that the passage of the constitutional amendment bill augurs well for the growing political consensus for economic reforms.
“This (GST) should boost business sentiment and eventually investment,” he said.
While timely implementation of GST will be challenging, there is no doubt that it should raise returns to investment across much of the economy, even while strengthening government finances over the medium-term, he said.