The Reserve Bank of India [ Get Quote ] on Friday said the country is unlikely to return to a high growth rate till the global economy comes out of the recessionary phase, but maintained GDP rate of 6 per cent is on course.
"The economy is unlikely to revert back to trend growth soon, as recession in the advanced economies would persist with global growth projected to contract by 1.4 per cent by the IMF with a more sizeable fall in world trade by 12 per cent," RBI deputy governor Usha Thorat [ Images ] said at a seminar in Hyderabad.
"The Indian economy is expected to grow by 6 per cent as per the latest assessment made by the RBI. GDP growth in the first quarter of 2009-10 (6.1 per cent) is broadly consistent with that", she added.
The global economic crisis, she said, has lowered India's growth rate from 9 per cent in 2007-08 to 6.7 per cent in 2008-09, mainly due to falling exports and shrinking foreign liquidity.
"The current focus is to bring back the economy to the high growth path as a key means to ensure higher living standard for all,," Thorat said.
RBI in its monetary policy forecasts the economy would grow at 6 per cent with an upward bias this fiscal, a rate that's in tandem with the Prime Minister's Economic Advisory Council Chairman C Rangarajan's projection of 6 to 6.5 per cent.
United Nations Conference on Trade and Development, however, has projected a much lower growth rate of 5 per cent for India this fiscal. Thorat said capital formation is the key to growth and for this it is important that more and more of the household savings are directed to financial savings, thereby facilitating capital formation.
Currently financial savings constitute 48.5 per cent of the total household savings. "If this share is to go up, there is a need for much greater penetration of the banking, insurance and capital market products in the country," she added.
Indian economy recorded an average of 8.8 per cent during 2003-08, which was the second highest growth rate during the period after China.