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Officials back Dholakia's objection to RBI's growth assessment for 2017-18

Divergence between CSO advance estimates and central bank's projections of GVA growth

Dilasha Seth & Indivjal Dhasmana  |  New Delhi 

RBI, Reserve Bank of India
File Photo: Reuters

As advance estimates by the statistics office for growth in (GV) came much below the Reserve Bank of India's (RBI) projections for 2017-18, officials in the (CSO) point to an assessment by a (MPC) member who said the central bank had overestimated the numbers, ahead of the December policy review.


Another official in the finance ministry said the assessment by the member, R Dholakia, was correct so far as the issue of cut in the policy rate was concerned.


According to minutes of the meeting in December, said overestimated growth. While the puts GVA growth at 6.1 per cent, had projected 6.7 per cent.


Dholakia, a professor of economics at IIM-Ahmedabad, had pitched for a 25 basis points (bps) rate reduction in the December meeting. He had also predicted the fiscal deficit mightexceed the target of 3.2 per cent of Gross Domestic Product this year, with nominal growth to grow slower than expected. remains under reasonable control, he had argued. However, had retained the policy rate at the same level.


Senior officials in the government say is the only one to have correctly gauged the economic situation and that policy rate cuts are required to spur the engine.


"growth estimates seem an overestimate. Only Dholakia's assessment in the is on the mark. There should have been a rate cut and there needs to be a rate cut," said a senior official.


This brings back the divide between government and over rates. Chief economic adviser Arvind Subramanian had in the second volume of the for 2017-18 said got its projection wrong by more than 100 bps for six of the past 14 quarters.

"I am not in agreement with the assessment of for both the CPI (consumer price index) and prospects in the near term

First Published: Fri, January 12 2018. 00:44 IST