Q3, Q4 numbers of FY 2017-18 to raise growth to 6.7% for whole FY

The Reserve Bank of India (RBI) after keeping the repo rate and reverse repo rate unchanged at 6 percent and 5.75 percent respectively, revised its projection of growth to 6.7 per cent for the year 2017-18 in its October policy resolution against 7.3 per cent in the August policy.

This revision takes into account the slump in growth estimated by the Central Statistics Office (CSO) for the first quarter of the year.

Taking into account various factors, the RBI said that the projection of growth of 6.7 per cent for the year 2017-18 as a whole is consistent with acceleration in the second half to 7.1 per cent in Q3 and 7.7 per cent in Q4.

Looking ahead, the outlook for agriculture and allied activities is quite favourable, with a near-normal monsoon, sowing acreage at close to last year's level and adequate food stocks.

The outlook for services has also brightened with several indicators of underlying activity posting significant upward trend.

In particular, railway freight, telephone subscribers, international air freight, international passenger traffic, passenger car and commercial vehicle sales, tractor and two-wheeler sales, steel consumption and foreign tourist arrivals have shown strong surges, indicating that trade, hotels and restaurants, transport, communication, and construction are likely to gain momentum and accelerate services sector growth.

There is some concern around the weakness in manufacturing in the first quarter of 2017-18. However, the recent data suggest that the outlook may be brighter.

The output of core industries posted a robust growth of 4.9 per cent in August. The purchasing managers index for manufacturing moved into expansion zone in August and September on the strength of new orders.

Coal production has posted a 33-month high in the month of August while electricity generation recorded the highest growth in the last 16 months, aided by thermal and renewable energy, and this accounts to manufacturing going forward.

The RBI's surveys point to robust consumer confidence and buoyant business expectations for the third quarter of 2017-18.