India to grow at 7.6% in FY’17: RBI

Mumbai, Aug 29 (PTI) The near-term growth outlook forIndia seems brighter than last fiscal and the economy islikely to expand at 7.6 per cent in 2016-17, the Reserve Banksaid today. "Overall GVA (gross value added) growth is projected at7.6 per cent in 2016-17, up from 7.2 per cent last year," RBIsaid in its Annual Report 2015-16. A better than anticipated agricultural performance and thepossibility of allowances under the 7th Pay Commission’s awardbeing paid out in the fourth quarter of 2016-17 provideupsides to this projection, it said. On the other hand, a rise in the implicit GVA deflator, asWholesale Price Index (WPI) based inflation hardens, willoperate as a statistical downside, RBI said. The effects of Brexit on the Indian economy have beenrelatively muted, including the immediate impact on equity andforeign exchange markets, it added. Yet, in view of the linkages to the UK and the euro area,spillovers through trade, finance and expectations channelscannot be ruled out as events unfold, it said. "Abstracting from these external shocks, the near-termdomestic outlook appears somewhat brighter than the outcomefor 2015-16," RBI said. While a durable pick-up in investment activity remainselusive, consumption will continue to provide the main supportto aggregate demand and may receive a boost from the revivalof rural demand in response to the above-normal and spatiallywell-distributed southwest monsoon as well as from the seventhpay commission’s award, it said. Industrial activity has been in contraction mode in theearly months of 2016-17, pulled down by manufacturing andlooking ahead, no strong drivers are discernible at thisjuncture that could engineer a turnaround. "Some support to industrial activity may, however, stemfrom the recent measures taken by the Government such as 100per cent FDI in defence, civil aviation, pharmaceuticals andbroadcasting," RBI said. The headline inflation, it said, is expected to trendtowards the target of 5 per cent by the last quarter of theyear, although at the current juncture, upside risks areprominent. "If the current softness in crude prices proves to betransient and as the output gap continues to close, inflationexcluding food and fuel may likely trend upwards andcounterbalance the benefit of the expected easing of foodinflation," it said. RBI said it is also important to take note of impact ofthe implementation of the Seventh Pay Commission’s award onthe future trajectory of headline inflation. MORE PTI HV NPSA