Economy is in recovery mode

The economy is on a growth path and there are signs of early stages of recovery. This is indicated by acceleration in industrial activity and Monday’s GDP figures of 7.4 per cent growth is good news and looks sustainable because of various reforms and initiatives of the government relating to rail, port and road projects that would improve construction and housing activity.

RBI governor Raghu-ram Rajan said “whilst there are areas of growth in manufacturing such as capital go-ods and passenger cars, weak rural demand and external demand holds back stronger overall growth.”

Similarly a revival in the services sector has been boosted by optimism on new business, though pockets of lacklustre activity as in construction weigh on the overall outlook.

Agriculture though affected by the prospects of both the rabi and kharif being hit, overall “the current outlook for agricultural growth in 2015-16 appears moderate at best at this juncture.”

He said the even the expected shortfall in the rabi crop can be minimised by astute supply management by the Centre in coordination with the states. Because of these positive factors he kept GDP growth for the year at 7.4 per cent and said could even be 7.5 per cent with some downside risks.