MUMBAI, Dec 15 (Reuters) - India’s economy is showing signs of revival and an earlier slowdown is bottoming out, central bank governor Urjit Patel has said.
“Our recent growth numbers may have disappointed some in the first quarter of this fiscal year,” Patel said during a speech last week, “but the second quarter has recorded an uptick and the slowdown may well be bottoming out.”
A transcript of the speech was posted on the Reserve Bank of India (RBI) website on Friday. (bit.ly/2CiGdTQ)
Patel cautioned that upside risks to inflation remained, and reiterated a neutral stance on monetary policy taken by the central bank earlier this month, when it kept interest rates steady to keep pricing pressures in check.
The governor also said that India’s current account deficit remained at sustainable levels. India’s July-September current account deficit widened to 1.2 percent of gross domestic product, or $7.2 billion, more than doubling from a year earlier, according to data from the Reserve Bank of India (RBI).
While India’s economic growth rose 6.3 percent in the July-September quarter, it was far below the 8 percent required to provide jobs to millions of people every year.
Meanwhile, consumer inflation rose unexpectedly to a 15-month high of 4.88 percent in November due to a sharp rise in food prices, breaching the central bank’s projected inflation band for the six months ending in March 2018, and way above its medium term target of 4 percent.
That sparked investors’ concerns that the RBI might raise interest rates sooner rather than later, despite sluggish economic growth.
“These are early days, and hence considerable caution and vigilance is warranted on the inflation front,” Patel said during the Dec. 7 speech, delivered about a week before the latest inflation figures were released.
A key factor that has hit India’s economic growth has been a massive pile of stressed loans totalling some $146 billion that Indian banks are struggling to shake off. Patel stressed the need to deal with those.
“In the year ahead, we must seize this opportunity to overcome the debilitating problem of corporate loan delinquency and get our banks back into the mainstream of financial intermediation,” he said. (Reporting by Zeba Siddiqui and Suvashree Dey Choudhry in Mumbai)