Economy to grow at 7.6%, says RBI

Economy to grow at 7.6%, says RBI

An optimistic Reserve Bank of India on Monday said the country’s economy is likely to grow at 7.6% in the current financial year.

“Overall gross value-added (GVA) growth is projected at 7.6% in 2016-17, up from 7.2% last year. A better than anticipated agricultural performance and the possibility of allowances under the Seventh Pay Commission’s award being paid out in Q4 of 2016-17 provide upsides to this projection,” RBI said in its annual report.

On the other hand, a rise in the implicit GVA deflator as the Wholesale Price Index inflation hardens will operate as a statistical downside, RBI added.

According to RBI, the near-term outlook appears brighter despite Brexit. “So far, the effects of Brexit on the Indian economy have been relatively muted, including the immediate impact on equity and foreign exchange markets. Yet, in view of the linkages to the UK and the euro area, spillovers through trade, finance and expectations channels cannot be ruled out as events unfold,” RBI said.

Abstracting from these external shocks, the near-term domestic outlook appears somewhat brighter than the outcome for 2015-16. While a durable pick-up in investment activity remains elusive, consumption will continue to provide the main support to aggregate demand and may receive a boost from the revival of rural demand in response to the above-normal and spatially well-distributed southwest monsoon as well as from the Pay Commission’s award, RBI added.

As far as inflation is concerned, the central bank stated that the target of 5% should be achieved by the last quarter this year. “Headline inflation is expected to trend towards the target of 5% by the last quarter of the year, although at the current juncture, upside risks are prominent,” RBI said.

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