RBI for 5-5.5% GDP growth

Reserve Bank has stuck to a GDP growth projection of 5-5.5 per cent saying that the economy is strong with soft interest rates, low price le...

Reserve Bank has stuck to a GDP growth projection of 5-5.5 per cent saying that the economy is strong with soft interest rates, low price level and all time high foreign exchange reserves.

RBI governor Bimal Jalan, however, warned that there should not be any complacency and that the regulator has to be always on the guard to ensure that India emerges as one of the “safest” markets in the world.

“Despite economic sanctions, border tensions, oil price hikes and other problems, we have been able to increase our forex reserves to all time high. Strong economic fundamentals are important,” he told NRIs at the Pravasi Bharatiya meet here.

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Although India’s GDP grew by 5.8 per cent till September, Jalan said “we will stick to our projection of 5-5.5 per cent GDP growth for this fiscal.”

Although Jalan declined to elaborate on the interest rate outlook, he said the rates were “soft”. RBI reduced bank rate to a 29-year low of 6.25 per cent in its busy season credit policy as part of its softer interest rate bias. Jalan ruled out reduction in the repurchase rate of government papers saying “there is no proposal for repo rate cut.” Markets were expecting a repo rate cut in view of high liquidity and fall in yields of government and corporate debt papers to near 6 per cent.

In case of price level, Jalan said: “inflation rate was benign.” Inflation rose to 3.22 per cent during the week-ended December 22. He assured NRIs that the regulator was making all efforts to make the Indian market safe for committing funds.