We estimate that the potential growth of real output of our economy – which is determined by the growth of the labour force, capital investment and productivity growth – is currently in the region of 6–7 percent per annum. In the last fiscal year, real output growth was only 3.4 percent; about half of the potential growth rate.
As a consequence, a negative output gap has opened up. Actual output is lower than potential mainly because of constraints on the demand side, which include constraints arising from macroeconomy policy and those emanating from the weaknesses in the global economy.