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Jalan stresses on 6 pc growth rate

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The RBI Governor, Dr Bimal Jalan, along with Mr G.P. Muniappan, Deputy Governor, during the RBI's Central Board of Directors meeting in Kolkata on Thursday.

KOLKATA, May 15

THE Reserve Bank of India expects the country's economy to clock six per cent growth this year subject to the nature of the monsoons. This was stated here by Dr Bimal Jalan, Governor of the Reserve Bank of India.

Acceleration of the growth rate was of prime significance, Dr Jalan said, adding that this was particularly difficult in a country marked by huge diversity and a large population. The main issue in such a situation relates to availability of adequate credit at reasonable rates. He was addressing a meeting organised by the Indian Chamber of Commerce here on Thursday.

"The desire for high growth rates is universal, but achieving it is difficult for nations that have poor skills, low savings and inadequate resources. Some others fail because of policy constraints'', he noted.

India, however, had a number of advantages, the availability of natural resources was just one of them. The one reason why the country was slow on the growth front stemmed from its inefficiencies, which collectively led to low returns on investments.

In reality, India was faced with low productivity, especially because "there is a general societal acceptance for sloth and waste'', the Governor maintained.

The nation's inefficiencies were evident in many areas, and there was an urgent need to change the attitude towards them. It was felt that India was still growing well, and could improve further with higher commitment and the right intervention from the authorities.

"Our economy has become more secure from external shocks'', Dr Jalan said, adding that the country had seen a number of fundamental changes. The economic reforms (since 1991) and the new technology orientation, for instance, had changed many equations.

There had been a serious growth in the services sector as well. At the moment it was possible to "unbundle'' various types of services, and one could actually choose to be in the service where one was more efficient in. Further, a large number of services were already embedded in the manufacturing sector.

The RBI chief, who laid down a few prescriptions for the country, felt that the Government, corporates and individuals must "take a stake in growth'' — put in harder work and devotion. Investment in infrastructure, complete with cost reduction efforts, was the first solution. There was also a need to continue reforms in the public sector; it was possible to achieve higher productivity without hurting the interests of employees.

Procedural reforms were quite important, and there was a need to improve administrative efficiencies for better delivery of goods and services by the public sector. Incidentally, it was mentioned that the service record of the private sector was also poor in many ways. The Governor also underlined the significance of corporate governance, on which the ideals of operational freedom and de-regulation are based.

Replying to a question, Dr Jalan pointed out that the concept of Asset Reconstruction Company (ARC) was still in the early stages. It was, however, important in the context of recent developments in the banking sector.

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