Growth revival highest priority: RBI Annual Report

Mumbai: The Reserve Bank of India on Thursday reiterated that reviving consumption demand and private investment have assumed the highest priority in 2019-20, a sign that more rate cuts could be on the anvil.

"Strengthening the banking and non-banking sectors, a big push for spending on infrastructure and implementation of much needed structural reforms in the areas of labour laws, taxation and other legal reforms, which will also enhance ease of doing business in pursuit of fulfilling the vision of India becoming a $5 trillion economy by 2024-25," the RBI said in its annual report.

The central bank also expressed concern over falling rural demand amidst some surge in indices.

"Rural demand, however, was affected by moderation in agricultural growth as reflected in tractors and two-wheelers sales. Indicators of urban demand revealed a mixed picture in contrast. Air passenger traffic recorded its lowest growth in the last five years.

"Passenger vehicles sales were the lowest in five years on account of increase in insurance costs, volatile fuel prices and lack of financing options due to the liquidity stress in the non-banking sector. The production of consumer non-durables slumped to its lowest level in the past three years," the report highlighted.

The rate of gross domestic savings had increased marginally to 30.1 per cent of gross national disposable income (GNDI) in 2017-18 from declines in the previous two years.

The household financial savings had increased by 0.3 percentage points of GNDI, though it had remained much lower than 7.3 per cent during 2011-16. The rate of gross domestic investment in the Indian economy, measured by the ratio of gross capital formation (GCF) to GDP at current prices, had risen to a peak of 39.8 per cent in 2010-11 before a prolonged slowdown set in, taking it down to 30.9 per cent in 2016-17.

Growth in fixed investment collapsed to a 14-quarter low in Q4 of 2018-19 as production of capital goods registered a sharp contraction while imports nosedived.

On job creation, the RBI said official estimates suggest more regularisation of employment in 2017-18 and the various initiatives undertaken by the government are expected to create avenues for employment.