Asia > Southern Asia > India > RBI lowers economic growth projection to 6.7% in FY18

India: RBI lowers economic growth projection to 6.7% in FY18


The Reserve Bank today lowered to 6.7 % the economic increase projection for 2017-18 from its August estimate of 7.3 % in view of issues with GST implementation and lower kharif output estimates.

In its Fourth Bi-monthly Monetary Policy Statement, 2017 -18, RBI said the loss of momentum in initial quarter of the current fiscal and the initial advance estimates of kharif foodgrains production are early setbacks that impart a downside to the outlook on increase projections.

The implementation of GST so far as well appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term, it said.

"This may further delay the revival of investment activity, which is by presently hampered by stressed balance sheets of banks and corporates," it said.

RBI further said that consumer confidence and in general business assessment of the manufacturing and services sectors surveyed by it weakened in the second quarter (July- September).

On the positive side, firms expect a significant development in business sentiment in third quarter, said the Resolution of the six-member Monetary Policy Committee (MPC) put by the central bank on its website.

"Taking into account the above factors, the projection of real GVA (Gross Price Added) increase for 2017-18 has been revised down to 6.7 % from the August 2017 projection of 7.3 %, with risks evenly balanced," it said.

Fitch Ratings this week had lowered India's economic increase estimate for the current fiscal to 6.9 % from 7.4 % before next the GDP increase "unexpectedly faltered" in the April-June quarter.

Asian Development Bank too has lowered the increase projection to 7 % for the current fiscal from its before estimate of 7.4 %.

The real GVA increase slowed significantly in the April- June period of 2017-18, cushioned half by the extensive front- loading of spending by the central government.

GVA increase in agriculture and allied activities slackened quarter-on-quarter in the usual initial quarter moderation, half reflecting deceleration in the increase of livestock products, forestry and fisheries.

Industrial sector GVA increase fell sequentially inclunding on a y-o-y basis. The manufacturing sector the dominant component of industrial GVA grew by 1.2 %, the lowest in the last 20 quarters.

RBI said the uneven spatial distribution of the monsoon was reflected in the initial advance estimates of kharif production by the Ministry of Agriculture, which were below the level of the previous year due to lower area sown under major crops inclunding rice, coarse cereals, pulses, oilseeds, jute and mesta.

The central bank further said that the assessment of food prices going forward is "largely favourable", though the initial advance estimates of kharif production pose some uncertainty

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