Growth weaker than GDP numbers suggest, warns Rajan

Official data last week showed Asia's third-largest economy grew 7.5 per cent year-on-year in the previous quarter, outstripping China's 7 per cent growth in the same quarter and beating a Reuters poll of economists who forecast 7.3 per cent.

"Even with the 7.5 per cent growth numbers, there is some discussion of how much that includes special factors in the last quarter, including excise taxes and subsidy. And so when you subtract that, the growth in the last quarter doesn't look as strong as before," Governor Raghuram Rajan said.

"And so, you could point to those numbers also suggesting growth is weaker than at least the headline numbers suggest."

Rajan also said weak results from India's corporates suggested "final demand is yet to pick up strongly".

Monsoon outcome the biggest uncertainty

Rajan said the biggest uncertainty ahead was the outcome of the annual monsoon, after the rains missed their normal start date, along with subsequent government action.

"Each path of the sequence is fraught with uncertainty. So we need to figure out how this plays out. And, clearly government action is very important," Rajan said after the central bank's policy meeting on Tuesday.

Photograph: Reuters