“With more than half of the current financial year witnessing positive developments in the economy, the full financial year should conclude as projected with a strong growth performance and macroeconomic stability,” said the report prepared by the department of economic affairs.
But it cautioned that risks on the downside persist. Inflation is one of them that has kept both the government and RBI on high alert. Financial flows in the external sector also need constant monitoring as they impact the value of the rupee and the balance of payments. A fuller transmission of the monetary policy may also temper domestic demand, the report said.
It said the rapid reversal of rate hike expectations in the US and the slide in the US 10-year Treasury yield, coupled with the decline in oil prices, is good news for emerging markets in general, India included. On the inflation front, the decline in global crude oil prices and continued moderation in core inflation are likely to control inflationary pressures going forward, it added.