India’s GDP set to grow 5.5% in 2014-15: ADB

India’s GDP is poised to accelerate to 5.5 per cent in 2014-15 on the back of improved performance in industry and services sector but it may take some time for the country to reach its potential growth rate, says an Asian Development Bank (ADB) report.“The recent deceleration of economic growth in India appears to have bottomed out, but the economy will not reach its potential until the remaining structural bottlenecks are overcome”, said the ADB Outlook 2014 released today.

Indian economy, according to the Central Statistical Office (CSO), is estimated to record a growth rate of 4.9 per cent in 2013-14, up from a decade low of 4.5 per cent posted in the previous financial year. The economy has been growing at 9 per cent before the growth rate was pulled down by 2008 global financial meltdown.“India’s capacity for more rapid growth over the long term is high, with a promising outlook for labour, worker skills, capital, infrastructure, and productivity,” ADB Deputy Chief Economist Juzhong Zhuang said, adding that a serious effort on reforms would be needed to achieve and sustain higher rates of growth going forward.The growth is expected to rise further to 6.0 per cent in 2015-16 as the recovery in advanced economies will bolster external demand and government actions are likely to remove some structural bottlenecks impeding industry and investment, says the ADB report.

Monetary policy review: RBI holds key rates

RBI keeps reverse repo rate unchanged at 7 per cent. RBI keeps short-term lending (repo) rate unchanged at 8 per cent. Cash reserve ratio too unchanged at 4% .RBI pegs growth for 2014-15 at 5.5 per cent.Current account deficit expected to come down to 2 per cent of GDP in 2013-14.

In the first bi-monthly monetary policy statement for 2014-15, RBI Governor Raghuram Rajan decided to pause and not disturb status quo. The repo rate, the central’s bank main policy rate and the rate at which it lends money to banks, remained at 8 per cent. Other policy instruments such as cash reserve ratio also remain unchanged at 4%.

The RBI has decided to increase the liquidity provided under 7-day and 14-day term repos from 0.5 per cent of Net demand and term liabilities (NDTL) of the banking system to 0.75 per cent, and decrease the liquidity provided under overnight repos under the LAF from 0.5 per cent of bank-wise NDTL to 0.25 per cent with immediate effect.