The Reserve Bank of India (RBI) governor Urjit Patel said that the Indian economy had shown a strong performance in 2017-18 and is expected to accelerate further in the current fiscal year 2018-19.
While addressing the International Monetary Finance Committee, Patel said that although the real GDP growth was moderated to 6.6% from 7.1% a year ago, there was a strong rebound in the second half of the year on the back of a turnaround in investment demand.
Its resilience in performance for 2017-18 was backed by an acceleration in manufacturing, rising sales growth, a pickup in capacity utilisation, strong activity in the services sector and a record agricultural harvest, he added.
"Several factors are expected to help accelerate the pace of growth in 2018-19. There are now clearer signs that the revival in investment activity will be sustained," he said.
Patel also said that improved global demand should encourage exports and boost fresh investments is expected to give 7.4% growth in GDP for 2018-19.
He further said that since November 2016, headline consumer price inflation had generally remained below the medium term target of four percent. An unusual spike in vegetable prices pushed up inflation to a recent peak of 5.2% in December, but it eased in subsequent months to reach 4.3% in March.
The inflation outlook would be affected by several factors like moderation in food prices due to normal monsoon and a supporting food supply management.
"Countervailing this, upside risks emanate from the distinct hardening bias in crude oil prices, the steady firming up of inflation excluding food and fuel mirroring pick up in domestic demand, and spillovers from financial volatility as markets reprice the path of monetary policy normalisation by systemic central banks," he said.
Noting risks of inflation, monetary policy rate was kept the same at 6 percent in April 2018. The government is committed to fiscal prudence aided by buoyancy in tax revenues and rationalisation of subsidies, the gross fiscal deficit (GFD) of the central government has been steadily brought down since 2013-14 to 3.5% of GDP in 2017-18 without compromising on public investment requirements and social sector spending, he said.
Inputs from PTI