The Reserve Bank of India Made sharp adjustments to lower the growth projections to 6.7 percent for the current fiscal in comparison to the earlier estimate of 7.3 percent. The reasons for this can be attributed to the low production of kharif food grain and disturbances caused by the implementation of GST.
It clearly stated that the new indirect tax regime has led to certain ambiguities in the manufacturing sector which might possibly delay the revival of investment activities.
"The projection of real GVA growth for 2017-18 has been revised down to 6.7 per cent from the August 2017 projection of 7.3 per cent, with risks evenly balanced," said RBI in its fourth bi-monthly monetary policy statement of the present fiscal.
The implementation of GST has had some serious impacts on the growth until now which has created an uncertain future for the manufacturing sector in the short term.
"This may further delay the revival of investment activity, which is already hampered by stressed balance-sheets of banks and corporates," RBI said.
At the post-policy meeting, the Governor Urjit Patel stated that there are numerous factors which have affected the growth in the second quarter of this fiscal year and some of these reasons will dissipate. "In recent days, high frequency indicators suggest that the growth is in the uptick. Core IIP released yesterday was 4.9 per cent. In the second quarter, the services sector has been showing healthy growth rate. So, there is a possibility that the cyclical upturn will happen in the next two quarters," Mr. Patel added.
"It is too early. However, in my view and real time activity indicators do not yet paint the clear picture to be able to separate the transient component of this one quarter loss of momentum from the gradual decline in overall growth that has taken hold since Q1 of last fiscal. The long term trend is best explained by the deleveraging underway in the heavily indebted part of the corporate sector and in poor credit growth at public sector banks given they have inadequate capital relative to impending losses on their legacy assets,” said the deputy governor Viral Acharya.