RBI report hints at poor consumption and weak investment demand dragging recovery

The Reserve Bank of India (RBI) has released its macro-economic policy report. The report hints at poor consumption and weak investment demand dragging recovery. CNBC-TV18’s Latha Venkatesh reports.

Below is a verbatim transcript of her comments on CNBC-TV18.

The overall impression one gets by reading the first few pages is that clearly the RBI neither believe the recovery is very strong and nor does it believe that the threat of inflation is as serious as it has made out to be. The first reading indicates that tomorrow’s policy will not have a rate hike. The RBI never gives away anything; it clearly hedges by saying that there are upsides and downside risks to growth and inflation. But it is very clear that this sounds like a dovish document by the face of it. It says that and points out that the global recovery is extremely jittery and the W-shaped recovery cannot be ruled out which means another mild recession are not being ruled out. About India, it says that it is interesting while it acknowledges the IIP growth of 10.5 or so in August. It points out that Kharif is bad and therefore you can the survey of economists indicates that they have lowered their GDP growth.

This is not the RBI’s forecast; it is an average of professional forecasts which says that last quarter in July when it surveyed them. They had forecasted a growth of 6.5, now they are forecasting a GDP of 6% and that is because of the lower Kharif and primarily the tone of the RBI is that private consumption demand and private investment demand has not picked up at all. This is obvious in the low non-oil imports, in the poor credit off-take, in the fall in credit card loans and fall in consumer credit. All those indicating that private demand is not picked up which means it’s not very confident of recovery; it is also not being carried away by inflation. It says that the wholesale price index (WPI) has risen from March to October by 5.9%. If you take out food then prices have actually declined by 3.4%.This gives any impression that the RBI is still dovish.

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