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RBI expects a sharp recovery in growth

A few days ago, the economic survey presented by the government, treaded a cautious path by projecting GDP in the range of 6.75 per cent to 7.5 per cent for 2017-18, taking into account the uncertainty surrounding the real impact of demonetization.

twitter-logo Anand Adhikari   New Delhi     Last Updated: February 8, 2017  | 15:59 IST
RBI expects a sharp recovery in growth

A few days ago, the economic survey presented by the government, treaded a cautious path by projecting GDP in the range of 6.75 per cent to 7.5 per cent for 2017-18, taking into account the uncertainty surrounding the real impact of demonetization.

The research houses, too, in their recent estimates did not forecast a higher GDP of more than 7.0-7.1 per cent.

However, in its monetary policy review on Wednesday, the Reserve Bank of India (RBI) painted a sharp recovery in the economy in 2017-18 because of re-monetisation.

The RBI has pegged the GDP at 7.4 per cent in 2017-18.  So what all will bring the 'sharp' recovery? Here is the RBI's take.

1. Discretionary spending

The discretionary consumer demand held back by demonetization is expected to bounce back  beginning in the closing months of 2016-17 and will help in spurring the economic growth in the country.

2. Revival in cash intensive sectors

The economic activity in cash intensive sectors such as retail trade , hotels and restaurants and transportation, as well as in the unorganized sector is expected to be rapidly restored and this, too, will help in bringing up the country's economy, according to the RBI.

3. Surplus deposits with banks

The demonetization induced ease in bank funding conditions has led to a sharp improvement in transmission of past policy rates for healthy borrowers, which should spur  a pickup in both consumption and investment demand.

4. High capex in Union budget 2017-18

The emphasis in the Union Budget 2017-18 on stepping up capital expenditure and boosting the rural economy and affordable housing should also contribute to growth, RBI says.

 

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