In its annual policy statement scheduled to be released later this week, RBI will draw attention to the poor progress of the monsoon and warn of the possibility of a much lower rate of growth. The overall review of the macro-economic situation will draw attention to reasons why the rate of growth of the economy may be below earlier expectation this year.
A firm growth number is, however, not expected to be announced until end of October, when the RBIs board is slated to meet in Hyderabad and approve the busy season credit policy, to be announced in the last week of October.
It may be recalled that in his statement in Parliament Union finance minister Jaswant Singh had already pared down the growth estimate for this fiscal to 5.5 per cent, not taking into account the impact of the monsoon. While the jury is still out on the impact of the drought and the below normal monsoon on agricultural production and national income growth, most forecasts suggest that the year could end with no more than 5 per cent growth.
Some macro-economic research organisations have projected even lower growth, with the Centre for Monitoring Indian Economy (CMIE) forecasting the most pessimistic scenario of 3 per cent growth. Most analysts, however, believe that the final number could be anywhere between 4.5 per cent and 5.5 per cent, depending on agricultural production.
RBIs current expectation is that GDP growth in fiscal 2002-03 is likely to be around 5 per cent.
RBI sources denied that Governor Bimal Jalan had reiterated the 6-6.5 per cent growth figure during a recent interface with journalists in New Delhi. Some agencies had quoted Dr Jalan thus. It was clarified that the Governor had only stated what RBIs original forecast was and that a revision of this figure would be announced at the time of the mid year review of the economy and the announcement of the monetary policy statement.
While the external profile of the Indian economy is robust, and services sector growth is also expected to be around 8 per cent this year, it is the persistingly low manufacturing sector growth and the expected low growth of agricultural production which is going to force a scaling down of the growth estimate.