The Reserve Bank on Wednesday said India’s economy would grow about 5 per cent in this financial year while the current account deficit would be below 3 per cent of GDP.
The central bank also asserted that the country is ready for the tapering of the US Federal Reserve’s bond purchases.
“We are seeing some glimmerings of stronger growth. But it’s too early to say we have certainly hit bottom. But I am hopeful that we should be around 5 per cent,” RBI Governor Raghuram Rajan told reporters on the sidelines of the Delhi Economic Conclave here.
In October, the RBI lowered the economic growth forecast for the current financial year to 5 per cent from 5.7 per cent projected earlier. The economy expanded 4.8 per cent in the second quarter of 2013-14, pulling up GDP growth in the first half to 4.6 per cent.
The economy has to expand 5.4 per cent in the second half to clock 5 per cent growth in the full financial year.
Dr. Rajan said India is ready for the withdrawal of monetary stimulus by the US Federal Reserve. The reversal of the easy money policy by the US is expected to impact global markets as well as the economy.
“We are much better prepared to deal with any possible tapering. We would not say we are complacent. There would be unexpected effects of tapering, but we are much better prepared. We have a stronger (forex) reserve position. We have shown we can raise money if needed. And our CAD is significantly lower this year,” he said.
The current account deficit (CAD), which is the excess of foreign exchange outflows over inflows, rose to a record of 4.8 per cent of gross domestic product (GDP) in 2012-13 from 2.8 per cent in 2010-11.
“The CAD, by every estimate, it’s below 3 per cent this year. We are in a much better position. It will be below 3 per cent,” Dr. Rajan said.
Following measures taken by the government and the RBI to increase inflows and restrict gold imports, the CAD moderated to 3.1 per cent of GDP in the first half of this financial year. It was at 4.5 per cent in the first half of 2012-13.
Finance Minister P. Chidambaram had earlier said the CAD will be brought down to USD 56 billion or less, from USD 88.2 billion in 2012-13.