Recovery seen,yet to spread: RBI guv

Signs of recovery have emerged in the Indian economy,but a clear path can be predicted only after more widespread signals appear....

Signs of recovery have emerged in the Indian economy,but a clear path can be predicted only after more widespread signals appear,Reserve Bank of India governor D Subbarao said here on Thursday.

There are incipient signs of revival of business confidence. But these signs may have to be more widespread across indicators and more durable to draw any clear inference on the timing and the pace of recovery, the RBI governor said.

The RBI is,at this juncture,sticking to its previous assessment of real GDP growth of about six per cent for 2009-10,he said. Subbarao,who was in Bangalore to hold meetings with the Karnataka government and for the apex banks AGM,said specific indications of the recovery were evident in the ABN AMRO purchasing managers index of 55 for April indicating expansion. India is one of few countries to have PMI above 50 and this is a positive indicator, he said.

On the Index of Industrial Production,the numbers for FMCG,capital goods,cement and steel,commercial vehicles and two-wheelers have shown improvement in February or March,Subbarao indicated. The increase in rabi cropping area by two lakh hectare,that will sustain rural consumption demand,is another positive sign,along with rail freight movement and road transport improvement,he said. In addition,a Ficci survey has shown that a trough has been hit for weak economic growth.

I wish I could say precisely when the economy will start to recover. The pace of decline in certain areas has started to moderate with some sectors showing signs of recovery, Subbarao said.

The RBI governor linked the pace of recovery of the Indian economy with that of the global economy. Once the global economy begins to recover,Indias turnaround will be sharper and swifter,backed by our strong fundamentals and untapped growth potential, he said. He cited Indias supply constrained economy status as a key factor in growth.

The RBI governor said unwinding of expansionary measures put in place by the RBI will have to be coordinated with economic growth and will not be a sudden process.