The Reserve Bank of India (RBI) on Friday warned that the Indian economy would grow by 5.7% in 2013-14 — up from 5% in the previous year — and a more robust and sustained recovery in the broader economy would critically depend on improvement in governance and removal of structural bottlenecks.
“Recent monetary policy action, by itself, cannot revive growth. It needs to be supplemented by efforts towards easing the supply bottlenecks, improving governance and stepping up public investment, alongside continuing commitment to fiscal consolidation,” RBI said.
Headline wholesale prices-based inflation, which hit a 40-month low of 5.96% in March, could stay close to 5.5% during 2013-14, the central bank said in its monetary policy review.
“During 2013-14, economic activity is expected to show only a modest improvement over last year, with a pick-up likely only in the second half of the year,” the RBI said.
India’s factory output crawled at 0.6% in February as firms, hit by shrinking demand, produced less.
India’s current account deficit (CAD) has soared to a record of 6.7% of GDP, the report said. A widening CAD effectively means that India is buying more from the rest of the world.
“The outlook for industrial activity remains subdued, with the pipeline of new investment drying up and existing projects stalled by bottlenecks and implementation gaps. With global growth unlikely to improve significantly from 2012, growth in services and exports may remain sluggish. Accordingly, the baseline GDP growth for 2013-14 is projected at 5.7 %,” it said.