India expects resilient economy to grow at 6 percent

April 26th, 2009 - 12:09 am ICT by IANS  

By Arun Kumar
Washington, April 25 (IANS) Notwithstanding several challenges, the Indian economy remains resilient and is expected to grow at around 6 percent in 2009-10 with fiscal and monetary stimulus measures cushioning the downturn, global finance leaders were told here Saturday.

“On balance, with the assumption of normal monsoon, real GDP growth for 2009-10 is placed at around 6.0 percent,” Reserve Bank of India Governor Duvvuri Subbarao said as the International Monetary Fund and World Bank begin their twice-yearly meetings.

“Going forward, the fiscal and monetary stimulus measures initiated during 2008-09 coupled with lower commodity prices will cushion the downturn by stabilising domestic economic activity,” he said.

Noting that consumer price inflation too is declining, albeit less sharply, Subbarao said: “Notwithstanding several challenges, the Indian economy remains resilient with well functioning markets and sound financial institutions.”

The macro-economic management has helped in maintaining lower volatility in both financial and real sectors in India relative to several other advanced and emerging market economies, he said.

However, the global financial crisis interrupted India’s growth momentum, Subbarao said.

“Since downside risks have materialised, the GDP growth for 2008-09 is now projected to turn out to be in the range of 6.5 to 6.7 percent after clocking annual growth of 8.9 percent on an average over the preceding five years (2003-08).”

As the global crisis brought to the fore the strong interactions between funding liquidity and market conditions, Subbarao said, both the government and the Reserve Bank responded to the challenge of minimising the impact of the crisis on India in a coordinated and consultative manner.

The RBI governor said there are several challenges on the way forward, including implementing the fiscal stimulus packages, particularly stepping up public investment; revival of private investment demand; unwinding of fiscal stimulus in an orderly manner.

Maintaining the flow of credit while ensuring credit quality; preserving financial stability along with provision of adequate liquidity; and ensuring an interest rate environment that supports the return of the economy to a high growth path were also listed.

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