Reserve Bank of India’s latest annual report under Governor Raghuram Rajan, emphasizing on economic growth, curbing inflation, economic growth, clean-up of banking sector. Also, the RBI is vocal with its views at different seminars with the speeches being well documented on the website.  Therefore, the RBI report has become a routine document. Being the last report to be presented by Raghuram Rajan, there was expectation that there will be surprises in stored.

It seems that the Indian economy for the current financial year is brighter than the previous fiscal year, but the growth is still below potential. The cycle of rapid growth is anticipated from the coming reforms like the recently passed Goods and Service Tax (GST) bill passed in the Parliament.

Here are some important highlights about the annual report:-

1. Economic Growth

In the foreword report, Rajan stated the economic growth of the country is showing signs of pick-up, but it still it is below the potential achievement of the country.

The overall Gross Value Added (GVA) growth is projected to be 7.6% in the FY 16-17, up from 7.2% last year as per the annual report.

Additionally, the RBI report said the commitment of the central government to the path of fiscal consolidation in FY 16-17 has enhanced credibility of fiscal policy, which will, in turn, help in anchoring inflation expectations and in improving the business environment, inclusive by fostering credibility among international investors.

2. Interest Rate

The RBI is firm with the opinion that as long as the inflation is high, there is less room for lowering interest rate. However, the RBI has made further rate cuts conditional on the inflation rate moving down, which is admits is possible with the monsoon being good this year.

3. Monetary Policy Committee

The Monetary Policy Committee will be entrusted with making future policy decisions such as interest rates. Rajan stated that it is a welcome step forward in strengthening the transparency, continuity and independence of monetary policy.

4. Industrial Growth and Investment

RBI firmly states that investment will not be increasingly significantly in Financial Year 16-17 and the downbeat condition continues for some time. It can be assumed that the main reason can be private investment has not picked up and government expenditure has been slow and not fast enough to pull the triggers.

5. Stressed Assets

According to RBI governor, stressed assets will be an important area of focus in the near terms. The banks have done enough on recognition of bad loans, more focus should move to improving operational efficiency of stressed assets and creating the right capital structures is that all stakeholders can avail the benefit.

 

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