RBI Governor Urjit Patel reported that the Indian economy had performed resiliently in the year 2017-18. Addressing the International Monetary Finance Committee on Saturday, he said that the growth of the country is expected to gain more momentum in the current fiscal year.
A year ago, the real GDP growth fell from 7.1% to 6.6%. However, India witnessed a strong growth in the latter half of the year on account of a turnaround in the demand for investment.
The strong growth of the economy was supported tremendously by an increase in sales growth, acceleration in manufacturing, elevated credit utilisation, a record harvest in the agricultural sector, and strong activity in the services sector.
Patel also stated that since the month of November 2016, headline consumer price inflation had been lying below the 4% target for the medium-term. In December, however, an unforeseen rise in vegetable prices drove inflation up to a peak of 5.2%. The recent peak eased up in the following months and settled at 4.3% in March.
For the year 2018-19, it is expected that several factors will influence the pace of growth. Signs of sustaining the revival of investment activity are much clearer now. Urjit Patel mentioned that the global demand has seen improvement and this should, in turn, have a positive effect on exports. This should give a boost to fresh investments. Overall, the real GDP growth is predicted to grow to 7.4% for FY 2018-19 with balanced risks.
The RBI Governor also mentioned that if the monsoon played out normally and saw an effective food supply management, there could be a possible moderation in the price of food. This would likely influence the outlook of inflation, among several other factors.
The monetary policy rate was left untouched at 6% in April 2018, making the stance neutral, on account of the risk of inflation being on the upside.