Mumbai, Oct. 29: The Reserve Bank of India (RBI) today scaled down its GDP growth projections from 6-6.5 per cent to a more realistic 5-5.5 per cent and attributed the revision to “a fall in agricultural production following the erratic south-west monsoon this year”.
However, RBI expects non-foodgrain production to show a positive growth, even as it predicted the cumulative agricultural GDP (foodgrain and non-foodgrain) for 2002-03 fiscal to fall by around 1.5 per cent.
The RBI move is in line with the revisions made by other agencies tracking the Indian economy.
Food credit declined by Rs 800 crore as against an increase of Rs 10,200 crore in the previous year, on account of lower procurement and higher off-take of foodgrain. Non-food bank credit grew 7.4 per cent to Rs 39,600 crore, net of mergers, compared with 5.2 per cent to Rs 24,500 crore, reflecting a better outlook for industrial growth.
Apart from credit growth, various business expectations surveys points to a positive industrial outlook for the current year, the RBI said. However, as far as the industrial outlook is concerned, the impact of the deficient south-west monsoon may have to be considered in view of the linkages among the various sectors of the economy.
Pointing to the positives in the Indian economy despite the poor monsoon, RBI deputy governor Rakesh Mohan said compared with earlier instances, the country has been able to contain inflation despite the drought and the oil price hike thanks to better macro management and maturity of the economy.
The bank said the outlook for domestic prices was comfortable and the inflation rate was likely to be 4 per cent for 2002-03.
When asked if the RBI was targeting any specific level of foreign exchange reserves, governor Bimal Jalan said, “We do not target any specific level and are comfortable with the current level” ($ 64 billion). All additions to forex are of non-debt nature and “we do not see any upsurge in oil prices also”, he added.
Despite several unexpected adverse developments on the external and domestic front, India’s external situation has remained satisfactory, the governor said. Moreover, he said the country’s balance of payments situation was likely to remain under control and the current account deficit was expected to be below 1 per cent of GDP for fiscal 2002-03. The April-September period witnessed a substantial increase in the flow of bank credit, an upturn in industrial production and buoyancy in exports to sustain growth.
As per the Central Statistical Organisation’s (CSO) latest GDP estimate, growth for the first quarter (April-June) of 2002-03 is pegged at 6 per cent as against 3.5 per cent in the first quarter last year. While this is in line with the projected rate of growth of 6-6.5 per cent, the growth rate may be lower in the complete fiscal as agricultural output is likely to fall further.
The RBI, however, expects a recovery in industrial production during the first half of this fiscal. The composite index of six infrastructure industries, namely electricity, coal, steel, cement crude petroleum and refinery products registered a growth of 6 per cent during April-September, a major improvement from 1.5 per cent a year ago.