Growth forecast for FY18 cut by 10 bps to 7.3%

Growth forecast for FY18 cut by 10 bps to 7.3%
The Reserve Bank of India (RBI) has lowered its gross value added (GVA) growth for 2017-18 by 10 bps to 7.3%. The central bank has also reduced headline inflation forecasts for the first half of the current fiscal to 2-3.5%. The move comes even as the monetary policy committee, headed by RBI Governor Urjit Patel decided to keep rates steady.

“With the CSO’s provisional estimates for 2016-17, the projection of real GVA growth for 2017-18 has accordingly been revised 10 bps downwards from the April 2017 projection to 7.3%, with risks evenly balanced,” RBI said in the second bi-monthly monetary policy statement for 2017-18.

The April reading has imparted considerable uncertainty to the evolving inflation trajectory, especially for the near months. If the configurations evident in April are sustained, then absent policy interventions, headline inflation is projected in the range of 2-3.5% in the first half of the year and 3.5-4.5% in the second half, RBI added.

RBI believes that there could be some upside risks to inflation due to disbursement of 7th Central Pay Commission allowances. “At the current juncture, global political and financial risks materialising into imported inflation and the disbursement of allowances under the 7th Central Pay Commission’s award are upside risks. The date of implementation of the latter is still not announced and as such, it is not factored into the baseline projections,” RBI said, adding, “The implementation of the GST is not expected to have a material impact on overall inflation.”

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