India has not gone back to the 1991 era yet: Bimal Jalan

NEW DELHI: Despite expressing disappointment over the fourth quarter Gross Domestic Product ( GDP) growth rate, Bimal Jalan, Former Governor of the RBI showed confidence that the Indian economy has not gone back to the 1991 era yet.

Jalan was of the opinion that both the political and economic situation during the 1991 crisis was very difficult. He said that at present the economy has the strength to grow on the back of the industrial sector. He hoped that India will not be faced with a situation similar to the unprecedented external debt crisis of 1991. Also read: Full interview
Asked about his expectations from the GDP growth in the quarters ahead, Jalan said that with the numbers shocking on the negative side for Q4, it was not possible to hazard a guess. Admitting that even though the bad global economic situation is impacting the Indian economy, Jalan told ET Now that the problems were not more magnified on the global scale than they were six months back.

He blamed the lack of confidence in India's growth story on the fundamental issues plaguing the economy. Stating that systemic problems were causing log jams and slower investments, Jalan said that implementation of the already announced policy measures is the key to reviving growth.

He said that even though the savings rate in the economy is good, low investment rate, productivity and project delays are throttling growth prospects. Jalan was of the view that while the monetary policy was of high importance for a country, in the current context its role is limited. He emphasised the need for political reforms to set the economic machinery going.

Asked about his take on the RBI's role in stemming the fall of the rupee, Jalan said that more than concentrating on the appreciation and depreciation, it was important to have a concrete exchange rate policy.

India's economic growth plunged to its lowest in nine years during the January-March quarter, deepening the gloom and pessimism that has gripped much of Indian business and highlighting what many economists and industrialists characterise as the inept handling of the economy by the Manmohan Singh-led government, which has sent investor confidence plummeting.

The government, which has often appeared to be in denial, blaming troubles in Europe for the economy's predicament, appeared to hit the panic button on Thursday evening, asking all ministries to cut non-plan expenditure by 10% and banning creation of new posts. Gross domestic product, or GDP, rose 5.3% in the three months to March from a year ago, down sharply from 6.1% in the previous quarter, the Central Statistical Office said in a statement on Thursday.

Finance Minister Pranab Mukherjee, who many blame for the current economic mess and a disastrous budget for 2012-13 that dealt a body blow to an already fragile business sentiment, said the economy may have bottomed out but had nothing concrete to offer.