Indian economy is currently witnessing a phase where signs of revival are in the process of taking a firm shape. Improvement in capacity utilisation and business sentiment in the last few months, along with the results of the IBC process in terms of expected realisation from the stressed assets, clearly indicate towards better growth prospects going ahead.
“The RBI Monetary Policy stance, slated to be announced tomorrow, therefore, is coming at a crucial time when there are increasing pressures on the inflation front and there is also a need to support growth revival,” said Mr Rashesh Shah, President, FICCI.
“While inflation at present is at manageable levels of around 4 per cent, it is expected to move up in the coming months due to the surge in crude oil prices and weakening of the rupee, but it may still be considerably below 5 per cent, and not pose a big challenge to the inflation management by the RBI,” added Mr Shah.
The RBI and the government must work closely in balancing the growth need and inflation concerns so that the revival of animal spirits in the economy could be turned into a firm growth path of 8 per cent plus starting with the current financial year, he said.
“Monetary policy stance will play a crucial role in this and RBI will obviously keep this in mind while announcing its decisions, even though the interest rate hike appears imminent in the backdrop of rising pressures from the rupee and oil prices.”
“Investment revival is very important at this juncture, especially when the IBC process is showing that the credit culture in India is changing for the better, which will help not only in handling the existing NPAs, but will also curb the creation of fresh NPAs,” said Mr Shah.
The positive sentiments in the economy, thanks to reforms like GST, RERA and IBC, will prove to be a big help in taking the growth cycle to the double digit in coming years, if the investment revival happens fast, he added