The Reserve Bank of India governor, Raghuram Rajan, says that India’s GDP growth might be weaker than what the headline suggests.
Talking to reporters in Mumbai after announcing the interest rate cut on Tuesday, Rajan questioned as to why an economy needed rate cut when it was growing at 7.5%. He said that there was a “contradiction” in the higher GDP growth numbers and abysmal corporate earnings particularly in the absence of any signs in the consumer demand.
Rajan’s statement comes days after the official release by the Central Statistics Office (CSO) revealed that the Indian economy had grown at 7.3 per cent in 2014-15.
The report showed that the country posted a 7.5 per cent growth in the Gross Domestic Product in the January to March quarter, outstripping China’s GDP growth of 7 per cent in the said quarter.
However, on Monday, jantakareporter.com reported how India’s annual infrastructure output had fallen to 0.4 per cent year-on-year in April. Commentators had described this as quite worrisome as the core output rate was at a 5.7% rise in the same period a year ago.
Rajan also made it clear that he was not a “cheerleader” for the market.
He said, “The RBI is not a cheer leader. Our job is to give people confidence in the value of the rupee, in the prospects of inflation, and having established that confidence, create a longer-term framework for good decisions to be made. ”
The RBI governor also asked the banks to pass on the cut to customers. Rajan has already announced .75 percent cut in interest rate, but banks have not passed the same to the customers thereby not affecting any significant change in an individual’s EMI.
In April this year, a visibly frustrated Rajan had described the bank’s insistence for holding on to high rates as “nonsensical.”