Indias growth robust,environment turbulent

With the government embroiled in a series of scams,decision-making has suffered. While a number of reform bills,including in the areas of land acquisition,insurance sector reform,FDI sectoral limit are with the parliament,there seems to be little hope of their successful passage, said the report. Under these circumstances,the strategy seems to be to achieve as much possible through the executive channel: for example,the finance ministry is working with RBI to ease financial sector regulation.

Deutsche Bank felt that top officials at the ministry are focussed on targeted cash subsidies for food and fertiliser. Efforts to control spending have also been ramped up; the imperative being reduction of wasteful expenditure and a clamp down on corrupt procurement practices,even if that means a short-term reduction in fiscal support to the economy.

On its interactions with senior officials at the central bank,the report said,Wages of the organised as well as the unorganised sector is on an uptrend. Rural development programmes such as MNREGA have boosted rural income. Additionally,diesel and kerosene price hikes are looming on the near term which will push up inflation further.

The report also made a case for the central banks hawkish stance: Slowdown in the growth momentum in rate-sensitive sectors cannot be sufficient justification to change the monetary tightening stance.