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  • Outlook and Projections

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    The IMF revised its global growth projections. Domestically, growth prospects improved due to a better monsoon season. While exports grew in October 2009 despite the Euro debt crisis, inflation rose to double digits in February 2010 due to increases in administered prices of items like fuel. The RBI subsequently increased its projection of WPI inflation for March 2011 to 6.0% from 5.5%, citing factors like food price inflation and global commodity prices. Its monetary policy aims to keep inflation between 4-4.5% in line with its medium-term goal of 3% inflation.

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    The IMF revised its global growth projections. Domestically, growth prospects improved due to a better monsoon season. While exports grew in October 2009 despite the Euro debt crisis, inflation rose to double digits in February 2010 due to increases in administered prices of items like fuel. The RBI subsequently increased its projection of WPI inflation for March 2011 to 6.0% from 5.5%, citing factors like food price inflation and global commodity prices. Its monetary policy aims to keep inflation between 4-4.5% in line with its medium-term goal of 3% inflation.

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    104 views6 pages

    Outlook and Projections

    Uploaded by

    cool_guy422000
    The IMF revised its global growth projections. Domestically, growth prospects improved due to a better monsoon season. While exports grew in October 2009 despite the Euro debt crisis, inflation rose to double digits in February 2010 due to increases in administered prices of items like fuel. The RBI subsequently increased its projection of WPI inflation for March 2011 to 6.0% from 5.5%, citing factors like food price inflation and global commodity prices. Its monetary policy aims to keep inflation between 4-4.5% in line with its medium-term goal of 3% inflation.

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    of 6

    Outlook And Projections

    Global Outlook
     IMF revised growth projection for global economy
     Inflation in advanced countries due to high unemployment, low capacity utilization and
    uncertainties about financial sector
     Increasing uncertainty about global recovery

    Domestic Outlook
     Growth prospects improved because of better monsoon
     Growth in exports in Oct 2009 despite Euro debt problem
     Recovery reflected in sales & profitability growth of corporate sector
     Global recovery slowdown affect all EMEs
     Baseline projection of real GDP growth revised for 2010-11 to 8.5% because of better
    industrial production
     RBI projection is consistent and IMF projection in line with others
    Inflation

     WPI inflation moved to double figures in Feb 2010

     Reserve Bank had placed the baseline projection for WPI inflation
    at 5.5 % in 2011.

     Increase in prices of many administered/regulated items such as


    petroleum products, iron ore and electricity.

     Deregulation in admin prices of petroleum products good for long


    term but inflationary impact in short term.

     Minimum support prices for agricultural products increased


    Contd..

    Food price inflation has remained at an elevated level


    reflecting structural bottlenecks in certain commodities
    such as pulses, milk and vegetables.
    Outlook of Inflation (Factors)
     Distribution of rainfall in the remaining period of
    Monsoon.
     Global energy and commodity prices have been showing
    distinct signs of softening over the past few weeks as
    expectations on global growth has moderated.
     Domestic growth outlook. If it keeps improving, it could
    lead to further demand-side pressures on inflation.
    Contd..

    Idle global capacity will allow competitive imports

    The baseline projection for WPI inflation for March 2011


    has been raised to 6.0 per cent from 5.5 per cent
    Contd..

    • RBI’s objective to achieve price stability.


    • Average inflation rate, in the last decade in terms of
    WPI and CPI, moderated to around 5 per cent from
    the historical trend rate of about 7.5 per cent.
    • Factors in the transformation.
    Monetary policy
    • Aim of monetary policy to keep inflation at 4-4.5% in
    line with medium term objective of 3% inflation
    Risk Factors
     Capital inflows
     Faltering of Global Recovering

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