As outlined by RBI in its monetary policy review, India is clearly showing strong growth, as the output gap is narrowing with economy operating close to potential. RBI raised its baseline projection for GDP growth in FY10 to 7.5 per cent from 6 per cent forecast in October 2009 in the monetary policy announced today.
Simultaneously, the WPI (wholesale price index) is up from 4.8 per cent in November 2009 to 7.3 per cent in December 2009 and therefore the central bank’s focus has shifted to controlling inflation from its earlier stance of nurturing growth as the economy emerged out of the credit crisis.
However, inspite of the upward revision in growth projection the RBI is still cautious about how broad-based this growth is saying that 'a few sectors' haven’t shown quite the same kick-start and government spend has been a 'dominant force' in the economy along with other stimulus measures undertaken at the peak of the crisis.
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