BackGrowth can top 6% next fiscal if everyone does their bit: Raghuram Rajan
Rajan says CAD at 2.1% in the September quarter is 'comfortable'
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Kolkata: India’s banking regulator expects the country’s economic growth to top 6% in the next fiscal year but that would need “a lot of work on everybody’s part".
Addressing a press conference in Kolkata on Thursday, Raghuram Rajan, governor of the Reserve Bank of India (RBI), said gross domestic product (GDP) growth was expected to accelerate to “mid-sixes" in 2015-16, even as he spurned calls earlier this month to make loans cheaper.
Credit rating company Moody’s Investors Service said this week that it expected India’s GDP to grow 5-6% next year, up from 5% in the current year, helped by growth in demand and decline in inflation. The country’s economy grew at less than 5% in the past two years.
Interest rate is one of the many factors that spur investments, Rajan said, adding that if others did their bit—a likely reference to policy interventions—India’s economy in 2015-16 could be growing faster than in the prior years to top 6%.
As the country benefits from falling crude prices, current account deficit at 2.1% is “comfortable", according to Rajan. RBI, though, remains “vigilant" and will keep a close watch on how it moves.
As inflation slows, fixed-income securities will become “more attractive" as investment options vis-à-vis gold. Though India has withdrawn restrictions on gold import, RBI isn’t concerned that it would lead to a significant surge in gold imports, Rajan added.
The restrictions couldn’t have been sustained for a long time, according to Rajan. They had to be withdrawn at some point, and there couldn’t have been a better time to do that than when commodity prices were weak.
Speaking about structural reforms in the financial sector, Rajan said the Union government has asked RBI to review the priority sector lending obligations in a bid to encourage foreign banks to turn themselves into subsidiaries incorporated in India.
Their “primary concern" is “priority sector lending obligations", Rajan said. RBI was reviewing these obligations in the light of the concerns expressed by them so that the “costs and benefits" were clearly understood.
Under Indian banking laws, 40% of loans are to be given the priority sector. It applies to all banks, including foreign ones with more than 20 branches.
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