A paper on `Policy options to boost growth in 1999-2000' stated that if the CRR is reduced to 9 per cent and the bank rate to 7 per cent, the growth rate would improve marginally to 5.9 per cent from 5.8 per cent expected under the present policy framework.

This would also marginally reduce the current account deficit by pushing up the export growth rates and reducing the import growth. The fiscal balance of the Government will improve marginally as higher growth would stimulate government revenues, the chamber felt.

According to the chamber, liberal monetary policy would not immediate help improve the growth of investments despite the decline in prime lending rates as the investment levels go up aftera time lag. The major drawback of such a policy was the higher inflation level.

If the real exchange rate of the rupee is depreciated by allowing the nominal exchange rate to go down by 3 per cent over and above the rate of inflation measured by the consumer price index, the GDP growth would rise to 6.3 per cent, Assocham reckons.

The paper states that under this policy option, the current account balance will improve faster partly aided by a pick up in export growth by almost 3 percentage points and a slowdown in import growth rates.

However, this policy too would fuel inflation as price levels increase further by as much as 1.5 per cent due to increase in import price and higher demand push. Even the economy was unlikely to improve very much under this policy regime.

Therefore, increased public investment was the only policy option that would push up GDP growth beyond 7 per cent mark.

The chamber further stated that the growth rates would be pushed up to the maximum of 7.4 per cent if half of theincreased funding is financed through the RBI credit to the government. On the other hand, if the government opt to increase the tax resources to finance the additional spending instead of monetisation, the growth rates will be marginally lower at 7.2 per cent.