| Reserve Bank governor Bimal Jalan in New Delhi on Saturday. (PTI)
New Delhi, July 5: Reserve Bank governor Bimal Jalan today said he expected the economy to grow at the target rate of 6 per cent and inflation to ease over a period of time.
In April, the RBI forecast a 6 per cent growth rate for the current year to March 2004, against 4.3 per cent in 2002-03 when farm output was hit by a severe drought.
“I expect the economy to grow at 6 per cent as the macro-economic fundamentals are good,” Jalan told reporters on the sidelines of a function to mark the Chartered Accountants’ Day.
The governor said the south-west monsoon appeared to be good and this would ease pressure on inflation, as measured by wholesale prices as a good monsoon triggers demand, boosts farm output and holds inflation steady.
The June-September monsoon — the lifeline of the country’s economy as two-thirds of the billion plus population live off agriculture — has got off to a promising start and has already covered 80 per cent of the country.
“We will watch the situation about monsoons and changes in inflation. We expect inflation to come down over a period of time,” Jalan said. “As of now we are sticking to the April policy announcement of 5-5.5 per cent inflation by the end of the year.”
Inflation, as measured by wholesale prices, fell to 4.97 per cent on June 14, from a two-year high of 6.47 per cent on April 12.
Asked if the strong macro-fundamentals might push the central bank for a mid-term review of the economy and inflation rate, Jalan said: “We factored in all the macro-economic parameters during our April policy announcement.”
“But, we would review it in the credit and monetary policy scheduled in October,” Jalan added.
Estimates by the Asian Development Bank and several private sector economists also peg the gross domestic product growth at 6 per cent in 2003-04. However, the World Bank has projected lower growth in India at just over 5 per cent.
“Growth should pick up pace slowly with the economy gathering steam only in the second half of the financial year,” said a senior consultant with a leading global consultant firm.
The governor also said the central bank would sell bonds through open market operations (OMO) only if it was concerned about money supply.
Asked if the RBI would intervene to stem the rupee’s rise against the dollar, which is at a nearly three-year high, Jalan said: “ I would not like to comment on that.”
The rupee has gained 3.4 per cent at Rs 46.33 since January, after nearly a decade of depreciation, which is affecting exports. Economists estimate the country’s export growth to shrink to 6 per cent in the financial, after an 18 per cent expansion last fiscal.