RBI foresees gradual recovery in economy over next two years

The Indian economy is set for a gradual recovery over the next two years after crashing to a probable sub-5% growth in 2013-14, but a lot will still depend on the pace of project implementation and global economic expansion, according to the Reserve Bank of India (RBI).

The Indian economy is set for a gradual recovery over the next two years after crashing to a probable sub-5% growth in 2013-14, but a lot will still depend on the pace of project implementation and global economic expansion, according to the Reserve Bank of India (RBI).

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The central bank forecast that in 2013-14 India’s gross domestic product (GDP) — the total value of all goods and services produced in the economy — will grow at a clip lower than last year’s 5%, but will expand between 5%-6% in the next two years.

“If policy actions succeed in delivering the desired inflation outcome, real GDP growth can be expected to firm up from a little below 5% in 2013-14 to a range of 5 to 6% in 2014-15, with risks balanced around the central bank’s estimate of 5.5 %,” the RBI said in its policy review.

“A pick-up in investment in an environment in which external demand continues to be supportive of export performance could impart an upside to this forecast,” it said.

The central bank also said the global economy, led by the strengthening of the US economy, is recovering but it is still uneven and subdued in the Euro area and Japan, and a slowdown in China seems to be underway.

In India, investment and consumption activity remains subdued and the “lead indicators of services suggest a subdued outlook, barring some pick-up in transport and communication activity,” it said.