The Hindu : National : 8.5 p.c. growth expected: Reddy

Online edition of India's National Newspaper
Sunday, Dec 16, 2007
ePaper

National

National

8.5 p.c. growth expected: Reddy

Special Correspondent

Global instability a cause for concern

Inflation will be contained at below 5 per cent
Poor agricultural growth cause for worry

CHENNAI: Ensuring economic stability and keeping inflation in check were the highest priorities of the current macro-economic policy, Reserve Bank of India Governor Y.V. Reddy said here on Friday.

“While there has been a significant increase in growth, our policies have emphasised stability,” Dr. Reddy said. “For the fiscal year, the current expectation is that growth will be around 8.5 per cent, though this is subject to review in three to four weeks. Inflation will be contained below 5 per cent.”

India was one of the few developing economies where inflation was under control. “Not many emerging market economies are without double-digit inflation.” Inflation had decreased from 9.6 per cent in the 1990s to around 4.8 per cent now.

“The objective of our monetary policy is to take inflation from [just] below 5 per cent to around 4-4.5 per cent,” Dr. Reddy said. “Optimally, we should aim for about 3 per cent, and we will aim to reach that in the next year or two.”

Economic stability

It was “a credit” to the macro-economic policy that despite political instability, the economy had achieved considerable economic stability. “At the moment, monetary, banking and credit domestic conditions are all conducive to growth with stability.”

However, global instability was a major concern. “While India is contributing to fiscal stability by prudent economic policies, global conditions are full of huge uncertainties.”

Poor growth in the agricultural sector was another cause for worry. “While its share of GDP is less than 20 per cent, 60 per cent of the population is dependent on agriculture,” he said.

“For this population, the annual increase in per capita GDP is less than 1 per cent, while the rest of the population is at eight times that rate.”

Dr. Reddy added that there was an urgent need for investment in the education and health sectors.

“In a country like India, just fiscal discipline and stabilisation are not enough. We also require structural transformation and investment in social sectors like education and health.”

Printer friendly page
Send this article to Friends by E-Mail

National