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Home  » Business » RBI's GDP estimates low: Economists

RBI's GDP estimates low: Economists

Source: PTI
November 03, 2003 15:51 IST
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Dubbing the Reserve Bank of India's GDP projection of 6.5-7.0 per cent as a "conservative estimate", economists on Monday said the central bank is watching the inflation situation and wants more action from commercial banks to reduce their lending rates further.

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"It (GDP projection) is a conservative estimate," Chief Economic Advisor to Finance Minister, Ashok Lahiri, said, reacting to the RBI's credit policy announcement.

The RBI revised its GDP projection from 6.0 per cent to 6.5-7 per cent in the face of good monsoons and industrial revival.

Lahiri had earlier stated that it was eminently possible that economy would grow by over 7.0 per cent and even touch 8.0 per cent this fiscal.

Research agencies like NCAER, ICRA and Crisil had also revised upwards the GDP growth targets to 6.5-7.13 per cent.

"You know, the central bank is always conservative. They would like to err on the side of caution and that is why they have said economy will grow by 6.5-7 per cent," Lahiri said.

Although RBI revised its GDP targets, it has kept bank rate, repo rate and cash reserve ratio untouched.

"RBI is not taking any risks by infusing more liquidity in the system. By not revising bank rate and repo rate, it is watching the inflation scenario. It has adopted a wait and watch policy," Crisil chief economist Subir Gokarn said.

Institute of Economic Growth director B B Bhattacharya said, "With the unchanged policy, RBI wants more action from banks in terms of reducing transaction cost and lending rate."

He, however, said the central bank had nothing on forex and exchange rate management in the busy season credit policy announcement.

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