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India's economic growth to expand at 7.4% in FY19: RBI Governor

The Reserve Bank of India's (RBI) Governor Urjit Patel has expressed hope that India's pace of economic growth will accelerate in the fiscal year 2018-19. He noted that the country's economy turned in a resilient performance in 2017-18. He also said that on the whole, real gross domestic product (GDP) growth is expected to expand at 7.4% in FY19, with risks evenly balanced and added that global demand has been improving, which should encourage exports and boost fresh investments.

Patel said that with the help of a turnaround in investment demand, there was a strong rebound in the second half of the year, even though the real gross domestic product (GDP) growth was moderated to 6.6% from 7.1% a year ago. He pointed out that the growth was also supported by acceleration in manufacturing, rising sales growth, a pick-up in capacity utilisation, strong activity in the services sector and a record agricultural harvest. He added that several factors are expected to help accelerate the pace of growth in FY19 and there are now clearer signs that the revival in investment activity will be sustained.

Talking about inflation, RBI Governor said that since November 2016, headline consumer price inflation had generally remained below the medium-term target of 4%. An unusual spike in vegetables prices pushed up inflation to a recent peak of 5.2% in December, but it eased in subsequent months to reach 4.3% in March. He added that several factors were likely to influence the inflation outlook, including a possible moderation in food prices if the monsoon turned out to be normal and was supported by an effective food supply management.

Highlighting that the government is committed to fiscal prudence, Patel said aided by buoyancy in tax revenues and rationalisation of subsidies, the gross fiscal deficit (GFD) of the central government has been steadily brought down since 2013-14 to 3.5% of GDP in 2017-18 without compromising on public investment requirements and social sector spending. He said that the GFD is budgeted lower at 3.3% in 2018-19. The government has accepted a debt rule that will bring down the debt-to-GDP ratio to 40% over a period of time by 2024-25.

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