Raghuram Rajan Lowers Growth Forecast to 7.6% for 2015-16

Mumbai: The Reserve Bank of India on Tuesday lowered economic growth forecast for the current fiscal year to 7.6 per cent from 7.8 per cent projected in April, citing various risks including poor monsoon and rising crude oil prices.

"Reflecting the balance of risks and the downward revision to GVA (gross value added) estimates for 2014-15, the projection for output growth for 2015-16 has been marked down from 7.8 per cent in April to 7.6 per cent with a downward bias to reflect the uncertainties surrounding these various risks," RBI Governor Raghuram Rajan said.

The CSO (Central Statistics Office) has come out with GVA to measure economic growth.

Real GVA, which is GVA at basic constant prices (2011-12) in 2014-15, is now estimated at Rs 98.27 lakh crore as against Rs 98.58 lakh crore estimated earlier on February 9, 2015, showing a growth rate of 7.2 per cent (as against 7.5 per cent estimated earlier).

Talking about the risks, Mr Rajan said while unveiling second bi-monthly monetary policy review that some forecasters, notably the India Meteorological Department (IMD), predict a below-normal southwest monsoon putting pressure on food inflation.

"Second, crude prices have been firming amidst considerable volatility, and geo-political risks are ever present. Third, volatility in the external environment could impact inflation," he said.

Since the last policy in April, the crude oil prices have witnessed an increase of 9 per cent and are hovering around $65 per barrel.

Retail inflation is expected to rise to 6 per cent by January, 2016 from the level of 4.87 per cent in April.

Both lower than average monsoon and higher food inflation would lead to reduction in demand and hamper growth. About 60 per cent of population is dependent on agriculture.