The Reserve Bank of India (RBI) on Tuesday, April 21 came out with its Annual Policy Statement. Apart from cutting key short-term rates to boost growth, the regulator also forecast the country’s gross domestic product (GDP) growth at 6per cent for the financial year 2009-10.
When asked if there was any pressure from political quarters to give out the 6 per cent GDP growth forecast — the government’s official estimate for this year’s GDP growth stands at 7.1per cent — RBI Governor Dr Duvvuri Subbarao said there wasn’t.
“It was our best professional judgment that growth in FY10 would actually be 6per cent and there was a considerable amount of debate on what the number would be,” he said.
The RBI Governor also added that he did not expect the GDP growth estimate to be revised with a downward bias later. “With the available evidence and judgments, I would say that going below 6per cent is a remote possibility.”
Subbarao said it was a fearful situation to be in when the country’s GDP growth was expected to come down. “When I go to international conferences, they say India is growing at 6per cent . But I keep reminding them (the western countries) that adjusting from 9per cent to 6per cent is as difficult and challenging as adjusting from 2.5per cent to 0per cent ,” he said.
The RBI Governor added that he expected the 6 per cent GDP growth phase to be over in FY10 and that things would improve post that. “The apprehension [that it would go beyond that] is far-fetched. Everyone in the world is talking of a global recovery, but how soon will it come? [I think it could be] late 2009 or 2010. Very few people are saying it will be 2011 and beyond. It’s my firm view that once global recovery starts, India’s recovery will kick in and will be sharp and swift,” he said. “I don’t think we will be locked in the low-growth number for an extended period of time.”
Here is a verbatim transcript of the exclusive interview with Dr Duvvuri Subbarao on CNBC-TV18. Also watch the accompanying video.
Q:Your forecast of GDP growth at 6 per cent caught many by surprise because the prevailing view was that it was politically difficult to go with that 6 per cent , since politically the country has gotten used to the 7 per cent range? Was there a lot of pressure? Did you have to bear that pressure and still come with 6per cent , or is it that there is pressure, so probably it is actually worse than 6per cent ?
A: No, there was no pressure. It was our best professional judgement that the growth in 2009-10 will be 6per cent and that’s the number we put. Having said that let me say that within the RBI there was considerable amount of debate on what the growth will be and having reflected on the various growth models that our people have worked on and having talked to people and listened to their judgement, we determined that the growth estimate will be 6per cent for 2009-10.
PAGE_BREAK
Q: You don’t want to give a bias? Would you fear that a downward bias is the more likely bias?
A: No I don’t think so. If indeed we thought there was bias, we would have put it in there like we did in the January policy statement. But there is less uncertainty to this number of 6per cent .
Q: Is there a feeling that we will get away with 6per cent only for a year or with the available evidence, what is your feeling?
A: With the available evidence and the available judgment I would say because at this point a lot of it is more judgement based on analytical insights. Everybody has access to the analytical insights.
But beyond that it is a matter of judgement whether you’re talking about the global economy or about the Indian economy. And based on available evidence and available judgement, I would believe that getting below 6per cent is a remote possibility.
More from MoneycontrolRBI cuts repo, reverse repo rates by 25 bps each
Will repo, reverse repo rate cuts lead to cheaper loans?
Comments
0 comment