Retaining its projections of 5.5 per cent growth for the year and 8 per cent inflation by January, the Reserve Bank of India (RBI), in its latest assessment of the economy, has warned that unless the Narendra Modi government delivers on the steps it outlined in the Budget for revenue augmentation and expenditure controls, meeting the stiff fiscal deficit target will be a challenge.
Managing food price pressures, especially of vegetables, will be tough, too, if the structural reforms outlined in the Budget are not implemented, it said.
Finance Secretary Arvind Mayaram, however, said the government was confident of 5.8 per cent growth this fiscal year as against 4.7 per cent in 2013-14. In its annual report 2013-14 released on Thursday, the RBI noted the signs of pick-up in mining and manufacturing but maintained recovery will be slow. Significantly, at a time when the Union government is laying emphasis on infrastructure creation as key to reviving growth, the RBI red-flagged strain in the banking sector from loans to private projects that have become stressed. The share of infrastructure in the total stressed loans is up sharply from 8.4 per cent in March 2011 to 29.2 per cent in March this year. “It is important to avoid a repeat of the past, where a push for infrastructure projects, many of which later stalled, resulted in accelerated growth in gross NPAs,” the RBI said.
