The Hindu Business Line : Economy will grow at 6.5% this fiscal: Rangarajan

Nitte (Udupi dt.), June 20 Dr C. Rangarajan, economist and Rajya Sabha MP, who has expressed the opinion that the Indian economy will grow at 6.5 per cent during the current financial year, feels that the world economic situation can improve by the end of 2010.

Delivering the graduation day address of NMAM Institute of Technology and Justice K.S. Hegde Institute of Management at Nitte in Udupi district on Saturday, he said that the Indian economy grew in the second half of 2008-09 at 5.8 per cent. “My own expectation is that the Indian economy will grow at 6.5 per cent in the current year.

Though this is sharp decline from the high rate of growth achieved earlier, it is nevertheless a satisfactory rate of the growth, given the world situation,” he said.

Domestic demand

Stating that domestic demand is the major driver of economic growth in the country, he said through suitable management of aggregate demand the country should be able to achieve a growth rate of 7-8 per cent next year.

To achieve anything higher than that, the world economic situation must improve substantially.

“Perhaps, this will happen towards the end of 2010 even though some early signs of recovery, green shoots as they call it, are even now visible,” Dr Rangarajan said.

India was caught in the grip of international financial crisis in the last quarter of 2008. Though the Indian financial system has no direct exposure to ‘toxic’ or ‘distressed’ assets, the impact of recession abroad on India was felt through routes of trade and capital flows, he said.

Highlighting the post-reform growth performance of the Indian economy, he said that between 1992-93 and 2007-08, the economy grew at 6.8 per cent on a compound average annual basis. He termed it as a significant improvement over the pre-reform period.

Poverty reduction

Stressing the need for translating growth into poverty reduction, he said: “We need to generate poverty reducing growth – that is, growth to which the poor contribute and from which the poor benefit. We need to expand employment opportunities and improve productivity across all sectors of the economy. We need to narrow economic disparities across and within the states without compromising on efficiency.”