Inflation, twin deficits are concerns for India's growth momentum

Nevertheless, India would probably remain one of the fastest growing large economies in the world

Amid a closing of the output gap, inflationary risks prompted the Monetary Policy Committee (MPC) to hike the repo rate by 25 bps in the August 2018 policy review. The Committee expects GDP growth to improve from 6.7 per cent in FY2018 to 7.4 per cent in FY2019 and 7.5 per cent in Q1 FY2020. At the same time, its inflation projections forecast a rise from 4.6 per cent in Q2 FY2019 to 4.8 per cent for H2 FY2019 and 5.0 per cent in Q1 FY2020, despite the back-to-back rate hikes.

As many as 10 of the 16 early indicators