Confident of economic recovery, the RBI Governor Raghuram Rajan on Thursday said capital investments are picking up but a stronger growth would require more reforms and clearing bottlenecks for stalled projects.
Dr. Rajan, known for critical analysis of macroeconomic trends, however said that subdued exports, primarily on account of global factors, remain an area of concern.
Talking to reporters after a meeting of RBI’s board, the central bank chief said, “I would say (economy is) picking up. We see some signs of capital investment picking up. There is a continuing need, which the government is trying to address, of putting some of the stalled projects back on track.”
Stating that the Indian economy is in the process of a steady recovery, Dr. Rajan said, “Would we want to (grow) faster? Yes, obviously. But we have to work in the areas of bottlenecks and areas where we need reforms to ensure that growth is strong and sustainable.”
Finance Minister Arun Jaitley had said on Wednesday that India is not satisfied with 6-8 per cent growth and “wants to transcend to another level and aim for 8-10 per cent growth”.
Replying to questions on inflation and its implications on the policy stance of the RBI, Dr. Rajan said: “Inflation is always a matter of concern. The news on monsoon front has been good so far. But it is something that we are watching. What we have said is policy stance is contingent on the day, and we are watching the data. We have to watch for the progression of data as we see it.
“...there are variety of projection about what could happen going forward. IMD thinks things will weaken in next 2-3 months. There are private forecasters who think it won’t. Let us see what happens. Forecasting is a difficult job and it’s a little noisy at this point.”
The rainfall so far has been much better than was originally projected by the Indian Meteorological Department.
It was 28 per cent more than normal in June.
The IMD had in its forecast on June 2 predicted 12 per cent deficit in rains during the current season.
As far as inflation is concerned, based on the Consumer Price Index, it was 5.01 per cent in May, while the Wholesale Price Index inflation was at (-)2.36 per cent.
On exports, Dr. Rajan said they “are an area of relative weakness. But they have been weak across the various Asian economies, to the exception of perhaps of China. The weak state of global economy is a big factor there.
“We need to continue to do the spade work to create sustainable growth and we discussed various plans that the RBI has over the coming years to do that.”
As regards the stalled projects, the RBI chief said, “Economic growth will help put projects back on track that are on difficulty. We are doing everything we can as we work with banks to put it back on track.”