Reserve Bank of India revises GDP projections

Mumbai: The Reserve Bank of India (RBI) has revised downwards India’s growth projections for FY16 to 7.6 per cent from 7.8 per cent projected in April citing various risks, including poor monsoon, rising crude oil prices and weak demand. “Reflecting the balance of risks and the downward revision to gross value added estimates for 2014-15, the projection for output growth for 2015-16 has been marked down from 7.8 per cent in April to 7.6 per cent with a downward bias to reflect the uncertainties surrounding these various risks,” RBI said in its bi-monthly monetary policy statement.

RBI noted that industrial production has been recovering albeit unevenly. “The sustained weakness of consumption spending, especially in rural areas as indicated in the slowdown in sales of two-wheelers and tractors, continues to operate as a drag. Corporate sales have contracted,” RBI said and added that the disappointing earnings performance could have been worse if not for the decline in input costs.

The Reserve Bank added that the capacity utilisation has been falling in several industries, indicative of slack in the economy. “While an upturn in capital goods production seems underway, clear evidence of a revival in investment demand will need to build on the tentative indications of unclogging of stalled investment projects,” it said.