RBI cautious, but optimistic–Deccan Chronicle–07.04.2018

The Reserve Bank tilted in favour of growth at its first bi-monthly monetary policy statement for 2018-19 on Thursday, while maintaining it would monitor the risks to inflation due to the possible rise in fuel and food prices in future. It will also track the impact of the house rent allowance announced for over 47 lakh Central staff under the Seventh Pay Commission. The good news is that growth is picking up and private investment is now contributing to boosting the economy. It was government spending that earlier fuelled growth. RBI governor Urjit Patel projected GDP growth to strengthen from 6.6 per cent in 2017-18 to 7.4 per cent in 2018-19. However, he cautioned against pitfalls like fiscal slippages, volatility in crude prices and rise in manufacturing costs in input and output prices.

For the first time, global conditions could really impact the Indian economy due to the trade wars triggered by US President Donald Trump’s tariff moves on Chinese imports. The possibility of India being next on the list can’t be ruled out. The US is its largest trading partner. Dr Patel offered a succinct recipe to beat this eventuality, including strengthening of domestic macroeconomic fundamentals, rebuilding the balance sheets of banks and helping corporates to de-leverage their balance sheets.

The aam aadmi can’t expect any immediate relief on the housing front as these depend on non-interest related issues like easy monthly interest payments on housing loans, cheaper and affordable housing provided by state governments and genuine implementation of regulations for the real estate sector and speedy dispute redressal. Going forward, much of growth and inflation of course depends on the southwest monsoon.

via RBI cautious, but optimistic

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