Mumbai: In an interview two days after the October monetary policy that left the policy rate unchanged, raised the year-end inflation projection marginally and pared the growth projection for fiscal 2018, Reserve Bank of India (RBI) governor Urjit Patel said there are visible signs of upturn and economic growth is likely to exceed 7% in the last two quarters of the year as projected in last week\u2019s monetary policy report.<\/p>\n
\u201cWe have started seeing the upturn. The Nikkei India Services PMI Business Activity Index rose more than 3 percentage points in September over August; the core sector IIP (index of industrial production) saw a 4.9% rise in August. If you look at some of the high-frequency data such as automobile and two-wheeler sales, you also see the upturn there,\u201d Patel said.<\/p>\n
We should aim at achieving the inflation target without losing sight of supporting economic growth
\n– RBI governor Urjit Patel<\/p>\n
The Indian economy\u2019s growth in the quarter ended June touched a three-year low of 5.7% on account of the lingering effect of last year\u2019s demonetisation exercise and the run-up to the implementation of the goods and services tax (GST) on 1 July.<\/p>\n
Most economists agree that this period of low growth is transitory and that the economy will see a revival in the second half of the year.<\/p>\n
Patel added that RBI will support growth, but not at the cost of inflation. According to Patel, while the 2 percentage points on either side of the 4% inflation target gives the central bank some flexibility, RBI\u2019s aim is to keep close to the target itself.<\/p>\n
\u201cGrowth is always there in the monetary policy committee\u2019s scheme of things; we don\u2019t lose sight of that but not at the cost of inflation. However, we have to be careful\u2014we should aim at achieving the inflation target without losing sight of supporting economic growth.\u201d<\/p>\n
He also said the real interest rate is important, but since it is inherently time varying there cannot be a rigid target for this, and a range is more helpful.<\/p>\n
\u201cWhat is important is that in a capital-scarce country like India, the real interest rate needs to be positive enough to encourage healthy growth of financial savings; we get into macro difficulties when real rates on financial savings become negative for a length of time,\u201d he said. The real interest rate is the interest rate minus the rate of inflation.<\/p>\n","protected":false},"excerpt":{"rendered":"
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