The Hindu : Growth rate may be lower: RBI

Online edition of India's National Newspaper
Saturday, Aug 31, 2002

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Growth rate may be lower: RBI

By Oommen A. Ninan

MUMBAI AUG. 30. The Reserve Bank of India has said that the economic growth rate for the current year is likely to be lower than 6 to 6.5 per cent — which was projected earlier — on the basis of current indications about the monsoon.

"On the whole, the macro economic prospects for the current year 2002-03 are mixed," the RBI said in its Annual Report 2001-02 released today. "There is a strong possibility that the growth rate of 6 to 6.5 per cent projected in the Annual Monetary and Credit Policy statement (April 2002), which was based on the assumption of a normal monsoon, will not be realised,'' it added.

On the one hand, the financial, liquidity and inflationary conditions are highly favourable for higher growth. The external sector is also strong with a high and growing level of foreign exchange reserves and competitive exchange rate. On the other hand, the agricultural outlook is sombre with the likelihood of widespread drought. This may also adversely affect the incipient industrial recovery unless countervailing and timely measures are put in place to accelerate the pace of industrial investment and economic reforms. A re-assessment of the projected growth rate will be attempted in the mid-term review of the Monetary and Credit Policy in October 2002, the RBI said adding "by which time reliable information regarding the effects of drought on the agricultural and industrial output will be available."

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