The Reserve Bank of India (RBI) on Thursday said that the country’s economic growth rate was expected to strengthen to 7.4 per cent in the current fiscal, from 6.6 per cent in 2017-18.
Announcing its first bi-monthly monetary policy for the current fiscal, the RBI said that the growth will accelerate from 7.3-7.4 per cent in first half of 2018-19 to 7.3-7.6 per cent in the second half of the current fiscal.
“On the whole, GDP growth is projected to strengthen from 6.6 per cent in 2017-18 to 7.4 per cent in 2018-19 in the range of 7.3-7.4 per cent in H1 and 7.3-7.6 per cent in H2 with risks evenly balanced,” RBI said.
In a statement released to announce the monetary policy, the central bank said that several factors were expected to accelerate the pace of economic activities in the year.
“There are now clearer signs of revival in investment activity as reflected in the sustained expansion in capital goods production and still rising imports, albeit at a slower pace than in January,” it said.
Secondly, global demand has been improving, which should encourage exports and boost fresh investment, it added.
The Economic Survey tabled in Parliament on January 29, had estimated that India would re-establish itself as the world’s fastest growing major economy with GDP expanding by 7-7.5 per cent in 2018-19.
“It is especially important that domestic macroeconomic fundamentals are strengthened, deleveraging of distressed corporates and rebuilding of bank balance sheets persisted with, and the risk-sharing markets deepened," RBI noted.
RBI dumps GVA model, switches back to GDP to measure economy
The Reserve Bank switched back to the gross domestic product (GDP)-based measure to offer its growth estimates from the gross value added (GVA) methodology, citing global best practices.
The government had started analysing growth estimates using GVA methodology from January 2015 and had also changed the base year to 2018 from January.
While GVA gives a picture of the state of economic activity from the producers’ side or supply side, the GDP model gives the picture from the consumers’ side or demand perspective.
Deputy Governor Viral Acharya said the switch to GDP is mainly to conform to international standards.
“Globally, the performance of most economies is gauged in terms of gross domestic product (GDP). This is also the approach followed by multilateral institutions, international analysts and investors, and primarily they all stick to this norms because it facilitates easy cross-country comparisons,” Acharya told reporters at the customary post-policy presser.
Even the Central Statistical Office (CSO) has started using GDP as the main measure of economic activities since January 15 this year, he added.
(With inputs from agencies)