Comments
High inflation rate is the biggest risk to growth outlook and the headline wholesale price inflation (WPI) needs to be brought below 6 per cent, the Government said in the mid year economic review tabled in the Rajya Sabha on Thursday.
“The outlook on growth is threatened by certain downside risks, the biggest of them being the high rate of inflation, which further dents the ability of the RBI to extend monetary policy support to growth revival,” the document said.
It also underlined the need to contain wholesale price inflation at below 6 per cent, so that “necessary leeway is available to the RBI to support economic recovery”. The document could not be presented in the Lok Sabha due to the pandemonium regarding Telangana. The inflation fell to 6.16 per cent in December from 7.52 per cent in November.
The RBI has maintained a hawkish policy stance and raised a key interest rate by 0.25 percentage points in its latest monetary policy review with the aim of taming inflation. The central bank noted that that WPI inflation, excluding food and fuel segments, has risen.
The positivesOn the positive side, however, the document maintained that the Government’s recent initiatives could help place India on a high growth path.
“The recent structural reforms undertaken by the Government are likely to place the economy on a higher potential growth path, from where acceleration to a higher growth trajectory can occur reasonably quickly, once global recovery gains momentum and cyclical upturn strengthens,” it added.
Economic growth slipped to a decade low of 4.5 per cent in 2012-13 and now in the current fiscal it is estimated to grow at 4.9 per cent. Talking about the current account deficit, the document said that it is expected to $50-55 billion in this financial year from an all time high of $88.2 billion in 2012-13.
On the fiscal deficit front, the document protecting capital expenditure is paramount.
Regarding the manufacturing sector, it said, “It is sine qua non for raising the growth rate and sustaining it over the medium term. Continuing the recent initiatives of the Government to speed up project implementation and boost investment will help.”
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.