RBI lowers economic growth forecast for fiscal 2002-03

Tuesday, 29 October 2002, 08:00 Hrs
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NEW DELHI: The Reserve Bank of India (RBI) Tuesday lowered its forecast of the country's economic growth in the current fiscal year to between 5 and 5.5 percent from the earlier projection of 6 to 6.5 percent.

The rate of growth in India's gross domestic product (GDP) in fiscal 2002-03 will be lower in view of the poor rainfall in some parts of the country, said the central bank in its mid-term review of the credit policy for the year that began April 1.

Analysts say RBI's mid-term review of the policy was expected to lower economic growth forecast for the year ending March 2003, with a drought likely to severely dent agriculture sector output.

Agriculture, accounting for about a quarter of the GDP, is crucial to India's economy.
rainfall in the country was 24 percent lower than normal in the annual monsoon season. even though the monsoon revived towards the end of the season, the country continues to feel the impact of its worst drought in more than 15 years.

In April, the RBI had forecast the GDP would grow 6.0-6.5 percent this year.

India's economy grew by a meager four percent in the year ended March 31, 2001, compared to a 6.1 percent growth logged a year earlier.

RBI Governor Bimal Jalan said while the deficiency in rainfall caused pressure on the prices of many agricultural commodities, the domestic inflation outlook still looks comfortable.

He said the inflation rate is likely to be around four percent for the current fiscal year. The annual inflation, on a point-to-point basis, was 2.8 percent on October 12, as against three percent in a year ago period.

Referring to the developments in the world economy, Jalan said that the prospects for recovery in the global economy appeared to be somewhat slower than that anticipated earlier.

"However, in terms of relative performance, India and China are anticipated to perform better than the global trend."

According to the RBI governor, there has been an improvement in the growth of non-food bank credit this year reflecting a better outlook for industrial growth.

"Apart from credit growth, various business expectation surveys point to a positive industrial outlook for the current year," he added.

The central bank said India's foreign exchange reserves have increased sharply from $45.2 billion as on October 26, 2001, to $64.0 billion by October 25 this year, an increase of $18.8 billion.

Source: IANS
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