Business Daily from THE HINDU group of publications
Tuesday, Sep 19, 2006
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Business Daily from THE HINDU group of publications Tuesday, Sep 19, 2006 ePaper |
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Industry & Economy
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Economy Economy to grow 8-9 pc, says RBI Governor Our Bureau
Mumbai , Sept. 18 India would be less affected by any large and rapid adjustments in major currencies or interest rates of its trading partners as compared to many other emerging economies, according to Dr Y. V. Reddy, RBI Governor. Speaking at the G30's international banking seminar in Singapore, Dr Reddy said global developments could have a spill over effect on domestic interest rates. However, the adverse impact would be muted, as India does not depend on the international capital market for financing fiscal deficit, he said. Any adjustments in global imbalances may have some impact on the corporates, banks and households in India. A likely rise in interest rates could impact the housing market in general and expose the balance sheet of households to interest rate risk. This could increase the risk of loan losses for banks, Dr Reddy said.
Economy growth
About the growth of the Indian economy, the Governor said it would grow between eight and nine cent per year (for 2007-08 - 2011-12), as per the draft approach paper to the 11th Five Year Plan. The Government and RBI would maintain annual inflation below five per cent in the medium term, Dr Reddy said. He said the recovery in the Indian manufacturing sector has been supported by domestic and export demand, increased capacity utilisation and augmentation of capacities and improvements in private business and consumer confidence. The current account deficit to GDP ratio is expected to continue in the range of two to three per cent under the projected outlook of eight to nine per cent growth during the 11th Five Year Plan. For sustaining the India growth process, there is a need to eliminate subsidies, which are not appropriate and eliminate tax exemptions that are distortionary, Dr Reddy said. A more favourable investment climate is required. This can attract foreign direct investment, which is less volatile.
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