'Economy may recover in second half of 2009'

Economist and former Reserve Bank Governor C Rangarajan on Monday said that the economy will recover in the second half of 2009 and there would be distinct improvement in growth in 2010-11.

The gross domestic product (GDP) growth in 2008-09 would be below 7 per cent, down from 9 per cent recorded in the previous fiscal, he said while speaking at the 43rd convocation of the Indian Institute of Foreign Trade.

According to the Central Statistical Organisation's advance estimates of GDP in February, the economy is estimated to grow by 7.1 per cent during 2008-09.

"As regards India…we will (see) signs of recovery in the second half of 2009. Fiscal 2010-11 will see improvement in growth," Rajya Sabha member Rangarajan said.

The global financial meltdown and the drying up of liquidity, he said, have made it tougher for Indian companies to borrow funds from overseas markets, in addition to putting pressure on the domestic banking system.

Noting that the initiatives by the RBI to ease liquidity have not percolated to the ground level, he said it is necessary for the central bank to watch the liquidity situation and take steps from time to time.

The RBI is slated to announce its annual credit policy on April 21, which will take stock of the current liquidity situation and initiate steps to address the concerns of industry.