The Hindu Business Line : GDP to grow at 6-6.5 pc, says RBI

GROWTH prospects of the Indian economy remain strong and the overall GDP growth for 2004-05 is expected to remain in the 6-6.5 per cent range, according to the Reserve Bank of India's (RBI) report on Currency and Finance 2003-04, released on Thursday.

The report said that the economy would get a further boost from the expected consolidation under the Fiscal Responsibility and Budget Management Act, 2003 and that adherence to the envisaged targets under the Act will release additional resources for private sector investment. This is also expected to create more jobs.

The report observed sustained growth in production and also imports of capital goods and increase in bank credit as signs of revival of investment demand.

The report said that the economy has exhibited "remarkable stability" in 2004-05 despite being pounded by external shocks emanating from monsoon conditions and international oil prices.

"The further entrenchment of the growth momentum in the 90s, the opening up of the economy, and corporate restructuring have increased the competitiveness of the Indian industry, as is reflected in the robust merchandise export growth during the year so far."

The report added that despite the sharp rise in oil imports, the BoP position remained comfortable.

The strong growth in merchandise exports was supplemented by exports of services and buoyant remittances. The current account is expected to post a marginal surplus in 2004-05.

Foreign direct investment inflows have recorded a significant increase during the current year so far, responding to improved growth prospects as well as the ongoing liberalisation measures to attract higher FDI in critical areas such as infrastructure.

Barring the emergence of any unexpected developments in the various sectors of the economy and keeping in view the monetary policy for the second half of 2004-05, the overall stance for the second half will be provision of appropriate liquidity to meet credit growth and support investment and export demand.

Equal emphasis will be placed on pursuing an interest rate environment conducive to macroeconomic and price stability and maintaining a momentum of growth.

Measures will be considered in a calibrated manner in response to evolving circumstances with a view to stabilising inflationary expectations.

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