Rangarajan sees ray of hope next year

Hyderabad
Sept. 17: Observing that globalisation spreads both prosperity and distress, Dr C. Rangarajan, the chairman of Economic Advisory Council to the Prime Minister, said the country could recover from the economic slowdown in the second half of 2009-10 and in 2010-11.
“It (globalisation) cuts both ways. We will see definite signs of recovery in the second half of 2009-2010 and the economy will grow between six per cent and 6.5 per cent (2009-2010). The fiscal 2010-2011 will see a distinct improvement in growth and the economy will grow between seven and eight per cent,” he remarked. He added, “I believe, to achieve nine per cent growth, we have to wait for the world economy to improve and world trade to pick up. Interest rates may harden by end of this fiscal year.” The shock waves produced by the financial crisis would have its own repercussions on the structure of capitalism. Acceptable capitalism would require more regulation. Future discussions would centre on the nature and scope of such regulation, he said.
“Run-a-way financial innovations that are dysfunctional do more harm than good. These are the lessons that we can draw from the current financial crisis,” the veteran economist said.
Dr Rangarajan said that the accommodative policies of the Reserve Bank of India and the government may have to be slowly withdrawn. “There should not be a premature withdrawal unless there are signs of recovery,” he said. Later speaking to mediapersons on the sidelines of the International Conference on Global Economic Meltdown: Challenges and prospects organised by Disaster Management, Infrastructure and Control Society, Dr Rangarajan said he did not see RBI withdrawing its accommodative policy. Credit off take shows signs of recovery and this would pick up on demand.
He said stimulus packages were good and would continue till March next. “Inflows are improving. Disinvestment should be done at an appropriate time when the market is doing well,” he said.
Stating that the world was passing through a difficult time, he said the industrially advanced countries are now officially in recession. “This will be perhaps the deepest recession in the post-second world war period. We will see signs of recovery in India and rest of the world,” he predicted. Andhra Pradesh Chief Minister, Mr K. Rosaiah, who was the chief guest, said the state’s revenues had grown at 18 per cent per annum during the last five years and as a proportion to GSDP, it was the highest for any State in the country.