"On balance, there is a strong possibility that the growth rate of 6-6.5 per cent projected in the Annual Monetary and Credit Policy Statement (April 2002), which was based on the assumption of a normal monsoon, will not be realised. On the basis of current indications about the monsoon, the growth rate is likely to be lower than that projected earlier", said RBI.
The RBI added that a re-assessment of the projected growth rate will be made in the upcoming Monetary and Credit Policy in October.
FE had reported on August 26 that the central bank may have to scale down the growth rate estimates.
The RBI pointed out that the demand supply gap of infrastructure has a restraining effect on industrial revival. The need of the hour is deepening of reforms in order to harness the full potential of private initiatives or infrastructure, beside public investment, the RBI said. "A carefully calibrated policy packege with emphasis on contestability, enforceable contracts, development of markets for long-term debt instruments, proper pricing of infrastructure services, and above all, transparent and non-discriminatory rules of the game needs to be designed as part of the second generation reforms in infrastructure, guided by the relative strengths and weaknesses of the public sector and markets in infrastructure provision".
The RBI is optimistic that the economy is now in a position to withstand domestic and external shocks with minimal adverse consequences for growth, inflation, and financial stability. There are significants achievements in terms of sustaining growth, containment of inflation and alleviation of poverty.
But there are some loose-ends too. The medium-term growth prospects for the economy would be contingent upon a number of factors including legislative chanhes, regulatory focus, development of financial markets, and fiscal empowerment, futher reforms in real sector with emphasis on domestic trade. The underlying statement is that unless these are adderessed with proper emphasis, sustainable growth would have been far-fetched.