RBI Chief: Economy will pick up by year end

RBI Chief Raghuram Rajan told an audience at Harward Business School, Cambridge, Massachusetts that the Indian economy would pick up by the year end on the back of the startup capital of billions of dollars stalled in resource projects and good monsoon that is sure to boost agricultural growth. The Reserve Bank of India is about to review its monetary policy on October 29 with rising rates of inflation boosting the odds of another hike in central bank interest rates.

 

When asked whether there would be a rise in interest rates or not Rajan said that it was to early to comment on the same. Later he said that he believed that the country would grow in the final quarter courtesy the nod given to resource projects that are estimated at USD 115 billion. 

 

"The effects of that clearance will show up toward the end of the year. So growth will start picking up because these large projects will start coming back on stream," he said. He did not give a forecast for fourth-quarter growth."The second piece of good news is the monsoon has been very  good ... with a bountiful harvest, and with the associated activities like animal husbandry, poultry, also picking up, you can see a lot more value in the rural areas, which will help sentiment and growth."

 

India’s economic growth has drastically dipped in the last decade from 8 percent in 2002 to 5 percent in 2012-13 quarter. The current account deficit has ballooned and inflation has risen. 

 

Rajan also said that while investors were quick to blame structural abnormalities for the crisis. He stated that the unwinding stimulus in the wake of the global financial crisis coupled with policy reviews , stalled projects and the rise in Indian demand for gold created the crisis.

 

He told the academic audience, "There's a lot that is going on to fix these medium-term problems. If you are an outsider looking at India, learn to filter out both the irrational exuberance and the excessive pessimism. We're subject to both. You will become manic-depressive if you follow our moods."