Mumbai: The key challenge facing India’s new ruling coalition is to maintain a strong growth rate, which has suffered in the face of the global financial crisis, the Reserve Bank of India’s deputy governor said on Monday.
“We have to observe that uncertainty in the world is still very high and we cannot ignore the fact that we are more integrated to the world than we used to be,” Rakesh Mohan told reporters.
The central bank expects the economy to expand about 6% in the current fiscal year ending 31 March 2010, lower from the previous year’s estimate of 6.5-6.7%.
In the previous three fiscal years, Asia’s third largest economy grew at 9% or more.
Mohan said while India’s economy would continue to do well, expectations have to be realistic as the country cannot decouple with the rest of the world.
Merchandise exports contribute less than 15% of India’s gross domestic product, reflecting the fact that the country is far less dependent on external demand for spurring growth than other Asian countries.
Still, the economy has been hit by the crisis much more than expected due to large services exports and increased integration of the financial sector, analysts say.
The government and the RBI have taken aggressive steps to revive the economy after the collapse of Lehman Brothers last year hurt sentiment across the world and depressed demand.