RBI today lowered its economic growth forecast for 2015-16 to 7.6 per cent, from 7.8 per cent earlier, with Governor Raghuram Rajan saying that the real growth can be much weaker than the high headline GDP numbers.
In the last quarter of 2014-15, the economy grew at 7.5 per cent, pushing the full year GDP growth at 7.3 per cent, slightly lower than the advance estimate of 7.4 per cent.
"Even with the 7.5-per cent growth numbers, there is some discussion of how much that includes special factors in the last quarter, such as excise taxes and subsidies," Rajan told reporters here today in a post policy meeting.
"So, when you subtract that, the growth in the last quarter doesn't look as strong as before, and so you could point to those numbers also suggesting the growth is weaker than the headline number suggests," he said.
Rajan also said monetary easing can only create an enabling condition for a fuller government policy thrust that hinges around a step-up in public investment in several areas that can also crowd in private investment. RBI today reduced repo rate by 25 basis points to 7.25 per cent.
The central bank lowered the projection for growth for 2015-16 to 7.6 per cent from 7.8 per cent projected in April policy, citing continued weakness in investments.
"We still have weak investment, it is very tepid and we haven't seen a strong pick up," Rajan said.
Pointing out weak corporate results in the previous fiscal, the Governor said demand in the economy is still muted.
"In general, corporate results have been quite weak also, suggesting that the final demand is yet to pick up very strongly. So, those are reasons why we do feel the economy is still below potential, output gap is till is somewhat negative," Rajan said.
Deputy Governor Urjit Patel said currently the country is below its potential growth rate of 8-8.5 per cent.
