MUMBAI: The Reserve Bank of India Tuesday projected a higher economic growth rate of 5.5 per cent in the current financial year with the easing of supply bottlenecks and implementation of stalled projects.
“Real GDP growth is projected to pick up from a little below 5 per cent in 2013-14 to a range of 5 to 6 per cent in 2014-15 albeit with downside risks to the central estimate of 5.5 per cent,” the RBI said in its update on Macroeconomic and Monetary Developments 2014. GDP growth is expected to 4.9 per cent during 2013-14.
According to the Asian Development Bank (ADB), improved performance by industry and services is expected to drive India’s economy to expand by 5.5 per cent in 2014-15, but this is well below potential.
The economy had been growing at about 9 per cent before being pulled down by the 2008 global financial meltdown.
The RBI said the outlook for the Indian economy has improved over the past two months with cautiously positive business sentiment, improved consumer confidence, expectations of a modest recovery in growth and a decline in inflation expectations.
Easing of domestic supply bottlenecks and progress on the implementation of stalled projects already cleared should contribute to growth, as will stronger anticipated export growth as the world economy picks up, the RBI said. The challenge for maintaining the disinflationary momentum over the medium term, however, remains, it added.
Downside risks to growth have increased marginally since January 2014, taking into account the continued weak performance of industry and increase in risks to agriculture from the El Nino phenomenon, though the actual outcome on the monsoon depends on several other weather parameters, it said.
Tighter global financial and monetary conditions, in addition to continued fiscal adjustment in some countries, can also drag recovery, it said.
If electoral outcomes fail to provide a stable government, the downside risks to growth could accentuate, it said, adding that the recovery to a large extent remains contingent on improvements in the investment climate.