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The Reserve Bank of India (RBI) on Tuesday said it expects the economy to grow by 7.6 per cent in the current fiscal on the back of favourable monsoon, a notch lower than the upper end of government’s range of 7-7.75 per cent.

RBI

The uneven recovery in growth in 2015-16 is likely to strengthen gradually into 2016-17, assuming a normal monsoon, the likely boost to consumption demand from the implementation of the 7th Pay Commission recommendations and OROP and continuing monetary policy accommodation.

“The GVA (Gross Value Added) growth projection for 2016-17 is accordingly retained at 7.6 per cent, with risks evenly balanced around it,” RBI said in its first bi-monthly monetary policy statement for 2016-17.

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After two consecutive years of deficient monsoon, a normal monsoon would work as a favourable supply shock, strengthening rural demand and augmenting the supply of farm products that also influence inflation, it said.

However, a fading impact of lower input costs, persisting corporate sector stress and risk aversion in the banking system, and the weaker global growth and trade outlook could impart a downside to growth outcomes going forward, RBI said.

The Finance Ministry has projected Indian economy to grow 7-7.75 per cent in current fiscal, which at the upper end is higher than 7.4 per cent clocked last fiscal.

The Asian Development Bank (ADB) too had projected Indian’s economic growth for current fiscal at 7.6 per cent.