India: RBI lowers growth forecast to 7.3% for FY18 – 7 Jun 2017

  • The Reserve Bank on 7 Jun 17 marginally lowered the economic growth forecast for the current fiscal to 7.3% even as it hoped that remonetisation would enable pick-up in consumer spending, especially in the cash-intensive segments.
  • The Central Statistics Office (CSO) has pegged the growth of real gross value added (GVA) for 2016-17 at 6.6%, 0.1% lower than the second advance estimates released in Feb 17.
  • It said however that the continuing remonetisation “should enable” a pick-up in discretionary consumer spending, especially in cash-intensive segments of the economy.
  • Also, the reductions in banks’ lending rates post- demonetisation “should support both consumption and investment demand of households and stress-free corporates”, it said. RBI further said government spending continues to be robust, cushioning the impact of a slowdown in other constituents.
  • However, the resolution of the Monetary Policy Committee (MPC) also said rising input costs and wage pressures may prove a drag on the profitability of firms, pulling down overall GVA growth.
  • Further, the twin balance sheet problem – over-leveraged corporate sector and stressed banking sector – may delay the revival in private investment demand, it said.

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