[sbinews] RBI bullish on economy - The Hindu

  • From: "Rajendra S. Pai" <rajendra.pai@xxxxxxxxx>
  • To: <sbinews@xxxxxxxxxxxxx>
  • Date: Thu, 8 Jan 2004 08:15:53 +0530

NEW DELHI JAN. 7 . The Reserve Bank of India today projected that the Indian
economy was likely to grow 7 per cent plus in the current fiscal year. Also,
inflation would be benign in the range of 4 to 4.5 per cent.

The RBI Governor, Yaga Venugopal Reddy, utilised the forum of the Federation
of Indian Chambers of Commerce and Industry (FICCI) annual general meeting
here to provide his update on the economy, particularly after the Central
Statistical Organisation put the second quarter growth of the economy at 8.4
per cent. Normally, the RBI updates its economic projections twice a year,
in April and November when its presents a review of the monetary and credit

Conforming that "India is shining'' and that there was confidence in the
economy, Dr. Reddy said the RBI had upgraded its April projection for gross
domestic product (GDP) growth of 6 per cent to 6.5-7 per cent in November
2003. But the impressive real GDP growth of 8.4 per cent in the second
quarter had placed India firmly among the fastest growing economies in the
world during the current year. "It is reasonable to expect that unless there
are unforeseen circumstances, the overall GDP growth for 2003-04 as a whole
was likely to be around 7 per cent, with a continued upward bias,'' Dr.
Reddy said, implying that growth could actually be higher than 7 per cent.

On inflation, the RBI Governor said with inflation at 5.6 per cent as on
December 20, 2003, the rising trend in the last two months had not been
unexpected but the magnitude of the price rise had been above original

Dr. Reddy attributed this to the increase in the prices of fruits,
vegetables, mineral oils, fuels and cotton textiles. Also, international oil
prices had remained firm and the outlook for the near-term remained
uncertain. Second, world primary commodity prices had also increased in

Still, the Indian economy had three favourable factors to counter these
recent global trends. First, it was expected in the normal course that
inflation would fall in the mid-January to March 2004 period. Second, food
stocks and ample foreign exchange reserves provided a cushion.

Third, the Indian economy had, in recent years, shown remarkable resilience
in absorbing shocks, including on the oil front, the RBI Governor said.

The Governor, therefore, concluded that while the assumption in April 2003
was 5-5.5 per cent inflation, the latest assessment placing it in the range
of 4-4.5 meant that the overall inflationary situation continued to be
benign for 2003-04.

For industry, the Governor had a clear message. "Assuming that there are no
unexpected adverse developments, there is merit in maintaining the status
quo as far as the monetary and credit policy measures are concerned, while
pursuing the reforms process.''

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