The Hindu : India can become fastest growing economy

Online edition of India's National Newspaper
Thursday, Jan 29, 2004

Business

Business

India can become fastest growing economy

MUMBAI, JAN. 28. India could become one of the fastest growing countries among the emerging market economies (EMEs) on the back of actual borrowings less than the budgeted estimates, a GDP of 7 per cent, foreign exchange reserves of over $100 billion and becoming the highest remittances receiving country in the world.

The Reserve Bank of India in its `Report on Currency and Finance 2002-03' released here today, however, says the fiscal situation is still a cause for concern and the country has to ensure that th anticipated expansion in saving is productively utilised within the economy and not exported abroad.

On the potential of Indian capital markets, the report points out that they are still attractive in comparison to other emerging markets and the current volatility is not a cause for concern as the speculative interest seems to have declined in the current rally as is evident from a rise in deliveries as a percentage of turnover.

Inflation is expected to end the fiscal at 4-4.5 per cent although it will not be possible to attain the downward bias.

Referring to borrowings, the report says gross and net borrowings of the Centre are expected to be lower by 21 per cent and 33 per cent respectively than the budgeted amounts.

Flow of remittances from Indians working abroad rose to $15,174 million in 2002-03, reflecting its comparative advantage in skilled and semi-skilled labour exports.

The RBI report says initiatives have been taken to explore new means and instruments of sterilisation to manage liquidity in the system.

A prolonged sterilisation may exert upward pressure on interest rates, which can, in turn, attract further forex inflows neutralising the impact of sterilisation, the report says.

A medium term concern in this respect relates to enhancing the economy's absorptive capacity to achieve higher levels of real investment. The stock of government securities — the main instrument of sterilisation — declined from Rs. 146,534 crores at end-March 2001 to Rs. 36,919 crores by January 16, 2004.

The country also has to enhance productivity and competitiveness in the integrated global environment to assure sustained growth in exports of goods and services.

With a high potential for growth exports of manufactured goods to developed markets, it is necessary to move up the technology ladder, it says. — PTI

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