The Hindu Business Line : ‘GDP growth may slip below 7% in 2008-09’

Kolkata, Oct. 21 GDP growth in the country may slip below 7 per cent in 2008-09, Mr Rajiv Kumar, Director and CEO, Indian Council for Research on International Economic Relations (ICRIER), and a former advisor to Ministry of Finance said here on Tuesday.

Addressing a seminar organised by the Indian Chamber of Commerce entitled “Global Meltdown: Implications and Future of Indian Economy”, he said, “The GDP growth forecast this year is 7 per cent, but next year the growth rate can slip below that level.”

The country’s rising current account and fiscal deficit (8.6 per cent of GDP currently) and a projected trade deficit of 10.5 per cent of GDP were issues of obvious concern, he said. The current steps to cut cash reserve ratio and repo rates by the Reserve Bank of India would lead to a disproportionate infusion of liquidity only to a few players such as public sector banks, while other financial players would continue to lack credit cover, he said.

“The liquidity infused into PSU banks is not expected to be canalised much into productive investments now,” he said, indicating that a reform in the banking system was necessary in periods of slowdown to render them more competitive.

With regard to a falling rupee, Mr Kumar said the RBI should not allow the rupee to fall beyond Rs 50/dollar by adopting indirect measures. The hike in interest rates on NRI deposits and cut in repo rates were positive steps taken in that direction, he said.

Mr Sanjeev Goenka, Vice-Chairman, RPG Enterprises, said, “It is not a favourable environment for investments.”

The slowdown will also lead to slowing of expansion by corporates and a significant under-utilisation of capacity, he said.

Mr Satya Bansal, CEO, Barclays Wealth Management, said India was in a better position compared with China, Brazil, Russia and South Africa as it was comparatively less dependent on exports.

Maintaining 33-34 per cent domestic savings rate in India would compensate for the outflow of FIIs and FDIs, while helping the economy to grow at 7.5 to 8 per cent levels, he said.

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