The Hindu : Economy resilient to handle any shocks

Online edition of India's National Newspaper
Thursday, Feb 13, 2003

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Business

Economy resilient to handle any shocks

NEW DELHI FEB. 12. The Reserve Bank of India today expressed confidence that the Indian economy has the resilience to face any problems that may crop up in the event of a war in Iraq and said the soft interest bias would continue despite the rise in price level.

"War is war and nobody wants war. But our economy is such that it can handle any problem,'' the RBI Governor, Bimal Jalan, said on the sidelines of a book-release function, organised by the Associated Chamber of Commerce and Industry (Assocham) and the National Council of Applied Economic Research (NCAER) here.

However, the central bank would be watching the situation, Dr. Jalan said, when asked whether the volatile situation in Iraq could impact the macro parameters of India.

He said any revision in GDP and agriculture growth would be considered only in the lean season policy in April. The RBI projected that the Indian economy would grow by 5-5.5 per cent this fiscal.

Dr. Jalan said the monetary policy stance of maintaining soft interest rate bias had not changed as of now. "It (stance) is the same as what we have said in the October credit policy,'' he added.

The RBI had reduced the Bank Rate by 0.25 per cent to a 29-year low of 6.25 per cent in the last busy season credit policy in October 2002.

Dr. Jalan also ruled out cut in repo rates, the rate at which government papers are repurchased.

Asked about the rise in yield of government papers, he said, "I have always said that the market will take care of itself.'' The yield on benchmark 10-year gilt rose to 6.4 to 6.5 per cent in the last fortnight.

Asked whether rise in inflation will force the RBI to change its soft interest rate bias, Dr. Jalan said, "not yet.''

"We will watch for another two-three weeks,'' he said, adding that there were "no worry'' on the inflation, which rose to the fiscal's highest ever of 4.61 per cent.

The RBI had in its October policy projected inflation to be benign and forecast a GDP growth rate of 5-5.5 per cent for the current fiscal.

Speaking at the seminar, Dr. Jalan said, "faster growth is always better than slower growth and slower growth is better than no growth. We should work for growth.''

He, however, said the policy towards poverty elimination and other social upliftments cannot be neglected.

The RBI Governor also said the country would shortly prepay the high cost loans to the World Bank and the Asian Development Bank worth about $2.8 billion.

— PTI

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