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October 22, 2001
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RBI lowers 01-02 GDP growth forecast

Reserve Bank of India sealThe Reserve Bank of India on Monday lowered its economic growth forecast for the current financial year to 5.0-6.0 per cent from 6.0-6.5 citing poor performance by the industrial and export sectors.

"Taking into account the positive developments regarding the likely rate of growth in agriculture during the current year on the one hand, and the unfavourable behaviour of industrial and export sectors on the other...the projection of 6.0 to 6.5 per cent growth rate for 2001/02 now appears optimistic," the RBI said in its mid-year review of Monetary and Credit Policy.

"In view of the global uncertainty and the impact of global slowdown on exports as well as domestic growth, a firm projection of revised growth rate for the year as a whole is difficult," it said.

"Balancing various factors and assuming no further serious disruption in the world economic environment, at this stage, a projection in the range of 5.0-6.0 per cent growth in the current year may be reasonable for the purpose of credit and monetary management," the RBI said.

India's GDP grew 5.2 per cent in 2000-01 (April-March).

The RBI said that economic fundamentals remained strong.

The central bank said the risks of inflation were low as of now, but given the abundant liquidity in the system, it will continue to manage the liquidity using a range of instruments.

"Despite several uncertainties, the fundamentals of the economy as reflected in moderate inflation, stable and low interest rates, high foreign exchange reserves, large food grain stocks and competitive advantage of information technology related industries, are still strong," it said.

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