The Hindu Business Line : Nine pc growth possible: Reddy

THE Indian economy can reach a GDP growth rate of 8-9 per cent provided fiscal reforms are carried out, said the RBI Governor, Dr Y. V. Reddy, on an optimistic note, here.

``Eight to nine per cent annual growth in GDP is achievable when we have a strong fiscal situation in place. Fiscal reform, however, should not be restricted to controlling fiscal deficit,'' said the Governor, presiding over a lecture at the National Institute of Bank Management, Pune.

This is more optimistic that the latest GDP growth projections of `7 per cent with an upward bias' made by the Governor in the growth assessment report presented in early January 2004.

The upward revision had been made on the back of the record 8.4 per cent registered in the second quarter of this fiscal.

``Public debt in our country is an issue and it needs to be addressed. However, it is not an imminent problem or crisis at the moment,'' he added. ``It is now the ideal time to go forward with the reform process. It is easier to reconcile perspectives and interests of burden sharing in good times.''

According to Dr Reddy, the country has benefited from globalisation. But emphasis has to be on the potential dangers of the possibility of social disruption and the adverse consequences of extreme market volatility.

Ms Anne Krueger, First Deputy Managing Director, International Monetary Fund, USA, urged India to move towards full capital account convertibility along with trade liberalisations, citing the success stories of Singapore, China and Korea.

As a caveat she added that full convertibility should be permitted only under the following circumstances: sound economic system, a controlled fiscal deficit and inflation situation plus a flexible exchange rate.

She was giving a lecture, `A turbulent surge? International capital flows and the Indian policy response' at NIBM.

``The outlook for India is distinctly different from the last IMF report and this will be reflected in our next report coming out in April. We expect the global economy to expand more rapidly and the accompanying downside risks today are much lower than earlier,'' she said.

Dr Reddy said: ``We will monitor the oil prices carefully since it is an important factor. But there is sufficient resilience in the system and, therefore, the rise in it (the oil prices) is not a disturbing factor. As of now we maintain the inflation target of 4.0-4.5 per cent.''