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Updated: October 4, 2013 23:45 IST

No reason to dispute govt’s growth estimate, says Rajan

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Raghuram Rajan
Raghuram Rajan

RBI expects 5-5.5 per cent growth in current fiscal on good farm output

The Reserve Bank of India, on Friday, said the economy would grow by 5 to 5.5 per cent in the current fiscal, pinning its hopes on good farm output and improved exports.

“We have no reason to dispute the growth rate projected by the government at 5 to 5.5 per cent,” RBI Governor Raghuram Rajan told reporters after a board meeting here.

He based his optimism on expectations of a good kharif crop, improvement in exports and core sector performance data.

“...first estimate of kharif crop is significantly above the first estimate of last year. I think if we see some pick-up in exports...core sector is improving in performance. We wosuld hope we would reach that range of 5 to 5.5 per cent,” he said.

India’s economic growth rate slipped to a decade low of 5 per cent in 2012-13, and declined to 4.4 per cent in the first quarter (April-June) of the current financial year.

Cheaper loan scheme

Referring to the Finance Ministry’s decision to infuse additional funds in public sector banks to enable them to provide cheaper auto and consumer goods loans, Dr. Rajan said the scheme was still being worked out.

“I just want to emphasise that discussion is taking place on what can be done. Something will be announced as and when the scheme will be put together,” he said.

Replying to questions on the initiatives taken by the RBI to combat rupee depreciation, Dr. Rajan said, “We have got $5.6 billion through swap arrangements,” till date.

Soon after taking over as RBI Governor on September 4, Dr. Rajan announced the opening of a swap window facility to encourage banks to lure NRI funds.

On the report on backwardness of States by a panel he headed, Dr. Rajan said, “The committee looked at a number of issues to determine underdevelopment...we picked some arbitrary cut offs. The bottom 10 States we defined as least developed and higher 10 States we defined as developed.”

However, he added, “it does not mean that the higher 10 States are rich States, and it also does not mean that the lower 10 States are very poor states.” “The bottom line is that we need to offer ways to allocate funds...if you score worst, then you get more, according to this formula, and if you are improving your development, then you also get more,” Dr. Rajan said.

New bank licences

Meanwhile, the RBI set up a committee under former Governor Bimal Jalan to scrutinise applications for new bank licences, which are expected to be awarded by January.

“We have set up the committee under Bimal Jalan, Usha Thorat (former RBI Deputy Governor), C. B. Bhave (former SEBI Chairman) and Nachiket Mor (financial sector expert)...We will try our best to do it by January 2014,” Dr. Rajan said.

The panel would make its recommendations to the Governor and deputy governors, who would make the final proposals to the committee of the RBI central board.

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