India is watching the external developments in recent weeks and its impact on the economy, Chief Economic Advisor Raghuram G. Rajan said here today even as he expressed optimism of the economy growing by over 6 per cent during the current fiscal.

“The external environment has deteriorated somewhat,” he said.

“Yesterday’s US labour numbers came in very weak compared to expectations, the tensions in Korean peninsula which is creating problems [and in] Europe you have the Cyprus issues and some concern about some of the banking systems in some of the peripheral countries because of what happened in Cyprus.

I don’t think we have seen the end of that,” he said.

But Rajan said that he would stand by the 6.1-6.7 per cent Indian economic projections for this year.

“This year, we made a forecast of 6.1 and 6.7 per cent and I still stand by that. I am not going to drop on that but what we have seen in the last few weeks, indicators both in India and outside, and we will have to be watching carefully, but I don’t see any reasons to change our forecast.”

Rajan was speaking to reporters after delivering a keynote address at the two-day ‘IMPACT 2013’ conference, organised by the Indian Institute of Management alumni in Singapore.

“In India, the numbers were picking up towards the end of the year into the early part of this year, but I think most recent PMI numbers have not been as strong as they were before,’’ he said.

Good harvest

He said indications were good for the Indian harvest which would help control food prices.

“Inflation has been contained at very subdued levels month on month... The big issue now is to bring food prices under control. We have to wait and see what happens with the harvest.’’

“The indicators for the harvest are stronger than earlier estimates,” he said.

Foreign direct investment

Touching on Foreign Direct Investment, he said all areas were being looked at. “We will look at that [FDI] very carefully.’’

“But of course we will have to be realistic that FDI takes time to come — so changing the caps will be the indications of the broader directions of the reforms that will be going in,” Rajan said.

(This article was published on April 6, 2013)
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