RBI warns of structural constrains to growth

The Reserve Bank of India (RBI) will try to address structural constraints in several critical sectors of the economy in order to sustain growth and also contain supply side risks to inflation. Repeated supply shocks pose a constant challenge to ensuring a low inflation regime in India, which is necessary for achieving inclusive high growth, RBI said in its annual report.

A medium-term approach is required to augment the supply by addressing structural supply constraints, particularly in items of mass consumption goods, it said.

RBI said while it is committed to containing inflation through its calibrated monetary policy normalisation in the near-term, it would also ensure timely actions to mitigate risks to both inflation and growth.

Meanwhile, RBI said the average growth rate of foodgrains production in the country at 1.6 per cent during 1990-2010 has trailed behind the average population growth of 1.9 per cent in the country.

At the same time, RBI said, its monetary policy stance would have to recognise the possibility of sudden changes in the global outlook.

While India has avoided a financial crisis at home and the risk of a potential output shock is remote, RBI said volatile inflows of capital could be risky for stable economic growth.