"Economy at an uptick", says Reserve Bank even as it retains the GDP growth estimate

The economy is on an "uptick from now", the Reserve Bank said today even as it retained the GDP growth estimate for the current financial year at 6.7%.  The central bank sounded confident of the economy achieving its previous growth estimate of 6.7 per cent on a gross value-added basis.

Answering a query on the growth projection for the second half of the fiscal year, RBI executive director Michael Patra said: "It is going to be 7 and 7.8 (percent in the third and fourth quarters, respectively). So, we are on an uptick from now.

The Reserve Bank of India had sharply revised down its growth projection to 6.7 % in the October review, from the earlier estimate of 7.3 per cent, after the first quarter GDP faltered to a three-year low at 5.7 per cent.

The after-effects of the note-ban, which saw withdrawal of 86 per cent of the currency in a cash-dominated economy in November last year, and the disruption caused by the Goods and Services Tax (GST) roll out in July were blamed for the sluggish growth numbers.

The dip in growth to a three-year low in the June quarter had also led the finance ministry to think about a stimulus package, which looks unlikely now with the second quarter number printing at 6.3 %amidst fiscal deficit crossing 96.1 %as of October-end.

Urjit Patel quoted: "In the view of MPC (monetary policy committee), all these factors should help to create conducive financial conditions for nurturing higher growth,"

The frenetic initial public offer market will add to demand for credit in the short-run and boost the growth potential in the medium-term, ease of doing business rankings will help attract foreign direct investment and bank re capitalisation will help enhance allocative efficiency of resources.

An internal survey of RBI indicates that the services and infrastructure sectors are expected to see improvement in demand, financial conditions and the overall business situation in the fourth quarter, RBI said.The central bank  kept the key rates unchanged as expected but raised its inflation forecast for the remainder of the year to 4.3-4.7 %

The 6-member Monetary Policy Committee, headed by Patel,kept the repo rate unchanged at 6 per cent and reverse repo at5.75 % with a vote of 5:1.