Reserve Bank of India (RBI) governor Raghuram Rajan said on Saturday the latest industrial output numbers were disappointing and the economic recovery underway was volatile.
“We are in recovery. That’s broadly what we said before and by and large, we would stick to that. There is volatility in this recovery process. So, it’s not a strong (and) sustained recovery where all the signals are exactly in the same direction,” he said.
Rajan was speaking to reporters after an RBI board meeting addressed by finance minister Arun Jaitley. The RBI chief described the index of industrial production numbers released on Friday as “certainly somewhat disappointing”, though he did observe that the economy was broadly moving in the “direction of strengthening growth”.
The growth is “not as strong as we would like as a country... we have to see how it progresses”.
Industrial output for the third month in a row remained in negative territory, contracting 1.5% in January due to a poor showing by the manufacturing and capital goods sectors.
The declining industrial output prompted India Inc to press for a rate cut by the RBI, scheduled to announce its monetary policy on April 5.
On whether the RBI would take into account the government’s resolve to stick to the fiscal consolidation path and ease the monetary policy to boost growth, Rajan said the 3.5% deficit target was a firm indication of the government’s intent on fiscal consolidation.
“Both the markets and the RBI are comforted by that. How that feeds into monetary policy is... you have to wait and watch. I have said before that it is contingent... I don’t comment on the direction of monetary policy before the policy date or whatever dates we take action. We explain our actions at that time.”