MUMBAI: The government’s “start-up” initiative, commitment to fiscal targets, and thrust on boosting infrastructure could brighten the investment climate, though slow investment recovery and depressed global trade could impinge growth outlook for 2016-17, Reserve Bank of India (RBI) said in its annual monetary policy report.
The central bank cut its benchmark repo rate by 25 basis points to 6.50% as expected and forecasted 7.6% GDP growth in the fiscal year ending March 2017 based on the assumption of a normal monsoon, likely boost to consumption demand from higher government salaries because of the 7th pay commission recommendations, higher pensions for army men and loose monetary policy. One basis point is 0.01 percentage point.
In its annual monetary policy report RBI said that consumer confidence remains upbeat, as people are positive about their future economic and income prospects while households are optimistic about their purchasing environment.
However, corporate expectations of the business conditions remain subdued as RBI’s own business expectations survey has shown a dip in the first quarter of the currency fiscal compared to the quarter ended March.
“Professional forecasters surveyed by the Reserve Bank during March 2016 expected output growth to pick up gradually from 7.3% in 2015-16:Q4 to 7.7% in 2016-17:Q4, almost entirely on account of recovery in agriculture and allied activities. Staff projects gross value added growth to improve gradually during 2016-17 to 7.6%, with quarterly growth in a range of 7.3-7.7% and risks evenly balanced around this baseline projection,” RBI said.