Delayed monsoon, slowdown could slow growth: Reserve Bank | business | Hindustan Times
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Delayed monsoon, slowdown could slow growth: Reserve Bank

business Updated: Jul 27, 2009 19:00 IST

The Reserve Bank of India (RBI), in its macro-economic report released on Monday, said even though indicators pointed to an economic turnaround and business sentiment was looking up, delayed monsoon rain and continuing global recession could dampen growth.

"While indicators such as the higher growth in core infrastructure sector, positive growth in IIP, more optimistic business expectations and forecasts could be viewed as signs of recovery from the slowdown, there are other factors which may dampen the growth outlook such as the delayed progress of monsoon, decline in exports due to the persistence of global recession," RBI said.

"Lagged impact of the negative growth in manufacturing in the last quarter of 2008-09 on services demand, negative growth in capital goods, decline in the production of commercial vehicles, and an accelerated fall in import growth suggesting dampened demand conditions," the report added.

The central bank also predicted that while inflation could be seen move up to positive levels by the end of the year, poor monsoons could drive up food prices.

RBI will present the annual review of its monetary policy in Mumbai on Tuesday, with quite a few stakeholders opining that it should leave policy rates untouched and growth factor may factor in a dampened monsoons.

The apex bank also said that while India's economy continued to portray resilience, domestic slump in demand and persistent uncertainty in the global conditions were acting as a drag on the Indian economy.

It was of the view that stronger signs need to be shown by the economy before concluding that the economy was back on track on a high growth path of 8.8 per cent.

"Early indications for India suggest that the revival impulses need to strengthen further to boost the consumer and investor confidence, which could then set off a positive feedback loop to lift the growth momentum over time," the report said.