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The Reserve Bank of India has scaled down the growth forecast for the current fiscal to 5 per cent from the earlier projection of 5.5 per cent, citing downside risk stemming from domestic constraints.
“ ... headwinds to growth from domestic constraints continue to pose downside risks, and vulnerabilities to sudden shifts in the external environment remain,” RBI Governor Raghuram Rajan today said in the second quarter review of monetary policy.
RBI had projected 5.5 per cent growth for 2013-14 in its first quarter monetary policy on July 30.
GDP growth
The economy grew 4.4 per cent in the first (April-June) quarter of the current fiscal. It had expanded by 5 per cent in 2012-13 fiscal, the lowest level in a decade.
“Strengthening export growth and signs of revival in some services, along with the expected pick-up in agriculture, could support an increase in growth in the second half of 2013-14 relative to the first half,” Rajan said.
He said that the revival of large stalled projects and clearances by the Cabinet Committee on Investment would buoy investment and overall economic activity towards the close of the year.
World Bank, IMF forecasts
RBI’s projections are in line with that of the World Bank and International Monetary Fund (IMF) which have lowered the growth forecast for India earlier this month.
The World Bank slashed India’s economic growth forecast for the current financial year to 4.7 per cent from an earlier projection of 6.1 per cent. Besides, IMF projected an average growth rate of about 3.75 per cent.
Rajan said that the industrial activity has weakened with a contraction in consumer durables and capital goods sector, reflecting ongoing downturn in both consumption and investment demand.
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