Reserve Bank of India Governor Raghuram Rajan's Annual Report has said that India is yet to achieve its economic growth potential, with “the key weakness” for the country’s economy being investments by both the private and public sector, according to his foreword to the institution’s Annual Report. Rajan also reiterated the RBI’s aim to bring down Consumer Price Inflation to 5% by the end of the current financial year, Bloomberg reported.

Rajan highlighted the three areas the central bank needs to work on in 2016-'17, which, apart from bringing inflation down, include helping economic growth and the smooth implementation of monetary policy decisions by banks in the country. The governor went on to praise policy initiatives by the Narendra Modi-led government, including the “significant improvement in roads with respect to new constructions”, port utilisations and the ‘Make In India’ programme, according to The Financial Express. Rural wages also saw gains, Rajan said, adding that they will “continue to show a rising trend going ahead”.

However, projected inflation rates were still at their upper limit, which could have an effect on existing policy rates, Rajan observed. “The room to cut policy rates can emerge only if inflation is projected to fall further,” he said. The governor will be succeeded by Urjit Patel next month, who will oversee the introduction of the Monetary Policy Committee. Rajan said the MPC will be a “welcome step forward strengthening [the] transparency, continuity and independence of monetary policy” in the country.