The growth revival process of the economy has already started, Reserve Bank of India (RBI) Governor Urjit Patel said in an exclusive interview to Mint's Tamal Bandhopadhay.
This was Patel's first one-on-one interview with any newspaper after taking office in September last year.
"Growth is always there in the monetary policy committee's (MPC) scheme of things; we don't lose sight of that, but not at the cost of inflation," the central bank governor said.
The MPC had clearly laid down an inflation target of 4 percent. "[We] will strive to achieve that, keeping in mind the objective of growth," Patel said.
The governor admitted that there has been a drop in the Gross Domestic Product (GDP) growth in the June quarter to 5.7 percent (lowest in three years). However, he also said that one needs to factor in the transitory effects relating to GST while viewing those numbers.
Speaking on the growth forecast that RBI had lowered in last weeks monetary policy meeting, the governor said: "We have reduced our full-year growth forecast from 7.3 percent to 6.7 percent, but we feel, and our projections based on high frequency real economy indicators suggest, that growth will pick up in the third and fourth quarters (of the current fiscal year) to above 7 percent."
The apex bank chief pointed out that the Nikkei India Services PMI Business Activity Index rose more than 3 percentage points in September over August and the core sector IIP (Index of Industrial Production) saw a 4.9 percent rise in August. He said: "We have started seeing the upturn."
On liquidity management and the already excess liquidity available in the system, the governor said RBI's objective is to keep the weighted average of call money rate as close as possible to the repo rate. "There has been excess liquidity for a variety of well-known reasons, but the liquidity overhang is tapering off," Patel said.