Amid rising concerns over the deteriorating economic fundamentals of the country, the Reserve Bank of India (RBI) has cut Indian economic forecast to 5 percent for current fiscal from 5.5 percent projected earlier. The RBI in its second quarter review of monetary policy has said that domestic constraints coupled with weak external environment continue to put headwinds on the economic growth recovery.
The central bank has mentioned rising inflation a concern for India as it has been eroding consumers and business confidence in the country. The immediate focus of the central bank is to tame inflation. Meanwhile, country’s inflation is likely to ease in near future on the back of strong agriculture output, it added. Referring to the growth in second quarter of current fiscal, the RBI said that strengthening export growth and signs of revival in some services, along with the expected pick-up in agriculture, could support an increase in growth in the second half of 2013-14. By adding further, central bank said that revival of large stalled projects and clearances by the Cabinet Committee on Investment (CCI) would buoy investment and overall economic activity by the end of year.
Currently, Indian economy is struggling with slowdown and its growth has slowed down to four year low at 4.4 percent in April-June quarter, 2013. Further, all macro-economic indicators have deteriorated with current account deficit (CAD) widened to a record high of 4.9 per cent of GDP in the April-June quarter, 2013. Further, rupee value has also depreciated over 15 percent against dollar in 2013, which has become a cause of concern for the country, as India is structurally an import intensive country. Further, industrial activity has weakened with a contraction in consumer durables and capital goods sector, reflecting prevailing downturn in both consumption and investment demand.
